TaxTMI 
TaxTMI 
2022 (7) TMI 765
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....ii) I order appropriation of Rs.4932/- (Rupees Four Thousand Nine Hundred only) paid by the assessee against interest under Rule 8(3) of Central Excise Rules 2002 read with Section 11AA of central excise Act 1944; iii) I hereby impose penalty of Rs. 4,18,14,846/- (Rupees Four Crores Eighteen lakhs Fourteen thousand Eight hundred Forty Six only) under Section 11AC of the Central Excise Act 1944 read with Rule 25 of the Central Excise Rules, 2002 as proposed in subject show cause notice. 28. M/s Supermax Personal Care Pvt. Ltd (previously known as Vidyut Metallic Pvt. Ltd.) is at liberty to avail of the benefit of reduced penalty imposed as per (iii) above in terms of sub section (b) of Section 11AC of Central Excise Act 1944, subject to the condition that the entire amount of duty determined and confirmed hereinabove along with interest at appropriate rate, as ordered, is paid within 30 days of the date of communication of this order. If the same is not paid within 30 days of receipt of the order, then the benefit of reduced penalty shall not be applicable." 2.1 Appellant is engaged in manufacture of excisable goods falling under Chapter Nos. 8212900 & 39239090 ....
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....he interest amount of Rs. 4,932/- (Rupees Four thousand Nine hundred Thirty Two) paid through current account during March-2013 should not be appropriated against the interest demanded from them under Rule 8(3) of the Central Excise Rules, 2002 read with Section 11AA of the Central Excise Act. 1944; e. Penalty should not be imposed upon them under the provisions of Rule 25 of Central Excise Rules, 2002 read with Section 11AC of the Central Excise Act 1944. 2.5 The show cause notice was adjudicated as per the impugned order referred to in para 1, above. Aggrieved by the impugned order appellants have filed this appeal. 3.1 We have heard Shri Mihir Mehta, Advocate for the appellant and Shri Sydney D'Silva, Additional Commissioner, Authorized Representative for the revenue. Both sides have filed written submissions which have been taken on record. 3.2 Arguing for the appellants, learned counsel submits that,- • There was default in the payment of Central Excise Duty determined by them for the month of February 2013. The duty for the month February 2013, was to be paid by them as by 6th March, 2013. The defaulted duty along with interest latest could have....
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.... GAR-7 challan, but no such challan is available. • Thus In the instant case the Appellants have defaulted duty of Rs.5,00,000/- for February 2013, fact which has not been denied by them. The default has continued for period beyond thirty days. As the Appellants failed to discharge duty consignment wise without utilizing the Cenvat credit, the amount of Rs.4,18,14,846/ utilized as cenvat credit for the subsequent period is in contravention of Rule 8(3A) of Central Excise rules, 2002. • He relies relied upon the upon the following decisions in his support: • Sharp Industries Ltd. [(2014 (304) E.L.T. 689 (Tri Mumbai)] • Shivam Pressings [ 2015-TIOL-1188-CESTAT-MUM) • In the case of MALLADI DRUGS & PHARMACEUTICALS LTD. V/s UNION OF INDIA [2015 (323) ELT 489], the Madras High Court in its impugned order while expressing full agreement with the judgment of Gujarat High Court in Indsur Global Ltd. case (2014 (310) E.L.T. 833 (Guj.)] had held that Rule 8(3A) of the Central Excise Rules, 2002, is ultra vires of Article 14 of the Constitution of India. The said Rule being procedural prescribing the manner and method of payment....
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....filed by the Revenue. 4.1 We have considered the impugned order along with the submissions made in appeal and during the course of arguments. 4.2 Commissioner has recorded following findings for making the order as indicated in para 1, above: "12. I have gone through the case records and submissions made by the assessee. I find that the SCN seeks to recover duty defaulted of Rs. 5,00,000/- for February 2013 which was subsequently paid through Cenvat credit account (instead of current account) on 25.03.2013. I find that the SCN also seeks to recover the cenvat credit amounting to Rs. 4,13,14,846/- utilized by the assessee for the subsequent period April-2013 to February-2014 from their Cenvat account for contravention of Rule 8 (3A) of Central Excise Rules, 2002 and Rule 3(4) of Cenvat Credit Rules, 2004, 13. I find that the assessee in their defence submitted that they had opted for LTU status and the same was granted to them on 28 February 2013 by Chief Commissioner, Large Tax Payers Unit, Mumbai. I find that Rule 12A of Cenvat Credit Rules, 2002 specifies the procedure and facilities in respect of Large Tax Payer. As per Rule 12A (4) of Cenvat credit Rules....
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....id return there is no reference to any transfer challan being issued under Rule 12 A of Cenvat credit Rules 2002 evidencing transfer as claimed by the assessee. Therefore I am of the view the assesses claim that credit of Rs.43,26,000/- had been transferred from Plant IX to their plant VII factory cannot be established and accepted. 17. Moreover, I observe that in the ER 1 filed for March 2013 by Plant VII factory, there is no mention of credit of Rs. 43,26,000/- being availed at relevant column 5. DETAILS OF CENVAT CREDIT TAKEN AND UTILIZED as having being received on account of inter unit transfer under 12 A as claimed by the assessee. In absence of any receipt of credit on account of inter unit transfer, the claim of utilization of such credit for discharging duty liability cannot be accepted. Instead I find that the assessee has shown receipt of cenvat credit as under for the ER 1 filed for Mar 2013 for Plant VII Details of credit CENVAT ED CESS SEC EDU CESS Credit taken on inputs on invoices issued by manufacturers (Rs.) 4626336 92527 46264 Credit taken on inputs on Invoices issued by I or II stage dealers (Rs.) 595200 11904 5952 ....
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.... sub- rule (4) of Rule 3 of CENVAT Credit Rules, 2004, the assessee shall, pay excise duty for each consignment at the time of removal, without utilizing the CENVAT credit till the date the assessee pays the outstanding amount including interest thereon and in the event of any failure, it shall be deemed that such goods have been cleared without payment of duty and the consequences and penalties as provided in these rules shall follow." 21. I find that in the instant case the assessee has defaulted duty of Rs. 5,00,000/- for February 2013 which has not been denied by them. I also observe that in the instant case the default has continued for period beyond thirty days as discussed in forgoing paras. As the assessee failed to discharge duty consignment wise without utilizing the cenvat credit, I hold that the amount of Rs.4,18,14,846/ utilized as cenvat credit for the subsequent period is in contravention of Rule 8(3A) of central excise rules, 2002. 22. I observe that the assessee has placed reliance on Indsur Global Ltd. Vs Union of India, 2014 (310) ELT 833 (Guj.) and other various judgments in their favour. In this context I find that Hon'ble Apex court on 24....
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....d 11AA of Central Excise Act, 1944. [para 5] Penalty - Default in payment of duty on monthly basis - Reduction in penalty - In view of aforesaid default, penalty imposable. 25. For this continued act of omission of continued payment of duty through cenvat, for the period April 2013 to Feb 2014 even though they were not entitled, I uphold penalty proposed under Rule 25 of Central Excise Rules 2002 read with Section 11AC of the Central Excise Act, 1944." 4.3 During the course of arguments counsel for appellants had submitted a timeline depicting the events leading to issuance of show cause notice and impugned order. Said timeline is reproduced below. Date Particulars 09.03.2012 The Appellant applied for membership of LTU. 06.02.2013 The Appellant defaulted in payment of part of duty Rs 5,00,000/- for the clearance of February, 2013. 28.02.2013 The application of the Appellant to become member of LTU was granted/allowed. 26.03.2013 The Appellant transferred credit of Rs. 43,26,000/- under Rule 12A(4) of the CENVAT Credit Rules, 2004 from Plant IX to Plant VII at Thane. Present appeal related to Plant VII of the Appellant at Thane ....
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....Commissioner of Central Excise, on 26 March 2013, vide challan no.01/2012-13 dated 26 March 2013. They submitted that the credit so transferred was duly recorded in the monthly return filed for the month of March 2013 in respect of the Transferee and Transferor factories; that the credit of Rs.5,00,000/- transferred from the Plant IX- Bhiwandi factory was earned and availed upto January, 2013. They submitted that Rule 12A (4) of the Cenvat Credit Rules, 2004 permits a Large Tax Payer to transfer cenvat credit available with one of its registered manufacturing premises to its other such registered premises by making an entry of such transfer in the record maintained under Rule 9 and issuing transfer challan containing details mentioned in clause (ii) of Rule 12 A (4) of the Cenvat Credit Rules. They submitted that the first proviso to Rule 12A(4), provides that transfer or utilisation or cenvat, credit shall be subject to limitation prescribed in Rule 3 (7) (b) of the Cenvat Credit Rules; They reiterated that it is clear that the credit transferred from Plant IX- Bhiwandi was earned prior to February 2013, and as such they were entitled to and have rightly utilized the same for paym....
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.... Transfer of Credit under Rule 10A of CENVAT Credit Rules, 2004 0 0 0 0 0 0 Total Credit Available 24634636 402486 193927 1116561 22330 11162 Credit utilized for payment of Duty on Goods (Rs) 10682845 213671 106822 0 0 0 Credit utilized when inputs goods are removed as such (Rs.) 182667 3658 1827 0 0 0 Credit utilized when Capital Goods are removed as such (Rs.) 0 0 0 0 0 0 Credit utilized for payment of amount in terms of Rule 6 of CENVAT Credit Rules, 2004 (Rs) 0 0 0 0 0 0 Credit utilized for other payment (Rs) 0 0 0 0 0 0 Credit utilized for payment of tax on Services (Rs) 0 0 0 0 0 0 Credit utilized towards Inter Unit transfer of Credit under Rule 10A of CENVAT Credit Rules, 2004 0 0 0 0 0 0 Closing Balance (Rs) ....
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.... 66649 33324 963897 19282 9637 Credit taken on inputs on Invoices issued by I or II stage dealers (Rs.) 37170 0 0 0 0 0 Credit taken on inputs on imported inputs (RS.) 13943 0 0 0 0 0 Credit taken on Capital Goods on invoices issued by manufacturer or by I or II stage dealers (Rs.) 0 0 0 0 0 0 Credit taken on Imported Capital Goods (Rs) 0 0 0 0 0 0 Credit Taken on Input services (Rs) 0 0 0 0 0 0 Credit taken from inter unit Transfer of Credit under Rule 10A of CENVAT Credit Rules, 2004 0 0 0 0 0 0 Total Credit Available 15855736 225871 105635 2080458 41612 20799 Credit utilized for payment of Duty on Goods (Rs) 3740323 74810 37400 0 0 0 Credit utilized when inputs goods are removed as such (Rs.) 290594 5812 2905 0 0 0 Credit utilized when Capita....
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.... 0 0 0 Credit utilized when Capital Goods are removed as such (Rs.) 0 0 0 0 0 0 Credit utilized for payment of amount in terms of Rule 6 of CENVAT Credit Rules, 2004 (Rs) 0 0 0 0 0 0 Credit utilized for other payment (Rs) 0 0 0 0 0 0 Credit utilized for payment of tax on Services (Rs) 0 0 0 0 0 0 Credit utilized towards Inter Unit transfer of Credit under Rule 10A of CENVAT Credit Rules, 2004 0 0 0 0 0 0 Closing Balance (Rs) 139526 21170 12892 0 0 0 While making his observations in para 16 and 17 of the impugned order Commissioner has taken into account only the factual matrix as stated in the return of Plant-VII. He has not taken into account the return filed by the Plant-IX , wherein clearly it has been stated that unit has utilized an amount of Rs 43,26,500/- for purposes other than payment of duty on the finished goods and inputs cleared as such. While doing so he has also ignored the document "CENVAT CREDIT TRANSFER UNDER RULE 12 A (4) of 2004., CHALLAN No 01/2012-13 dated 26.03.2013" issued by the Plant-XI t....
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.... as provided by or under any rule. Sub-rule (3) of Rule 8 requires the assessee who fails to pay the duty by due date to pay the same along with interest. Sub-rule (3) reads as under : "(3) If the assessee fails to pay the amount of duty by due date, he shall be liable to pay the outstanding amount along with interest at the rate specified by the Central Government vide notification under Section 11AA of the Act on the outstanding amount, for the period starting with the first day after due date till the date of actual payment of the outstanding amount." Sub-rule (3A), a portion of which is under challenge before us, as it stood at the relevant time, reads as under : "If the assessee defaults in payment of duty beyond thirty days from the due date, as prescribed in sub-rule (1), then notwithstanding anything contained in said sub-rule (1) and sub- rule (4) of Rule 3 of CENVAT Credit Rules, 2004, the assessee shall, pay excise duty for each consignment at the time of removal, without utilizing the CENVAT credit till the date the assessee pays the outstanding amount including interest thereon and in the event of any failure, it shall be deemed that....
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....us affront to his right to carry on his trade or business guaranteed under Article 19(1)(g) of the Constitution. On both the counts, therefore, that portion of sub-rule (3A) of rule must fail. 35. The situation can be looked at slightly different angle. With or without the provisions of sub-rule (3A), liability to pay interest for the default period as per sub-rule (3) of Rule 8 continues. Sub-rule (3A) is basically a mechanism for stringent recovery and does not create a new liability unless this mechanism itself is breached. In such a mechanism to provide for withdrawal of CENVAT credit facility for paying the duty borders to creating a penalty. Insisting on an assessee in default to clear all consignments on payment of duty would be a perfectly legitimate measure. However, to insist that he must pay such duty without utilising CENVAT credit which is nothing but the duty on various inputs already paid by him would be a restriction so harsh and out of proportion to the aim sought to be achieved, the same must be held to be wholly arbitrary and unreasonable. We may recall, the delegated legislature in its wisdom now dismantled this entire mechanism and instead has provided....
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....High Court in the case of Beauty Dyers (supra). Once the provision has been declared ultra vires by any High Court then one has to proceed on the basis that the provision which has been declared as unconstitutional is non-existent. Therefore, unless a contrary decision is given by any other competent Court, the Tribunal in the State has to proceed with the decision of the other High Court as it is the law of land and binding upon it. Nothing has been shown to us as to why we should not follow the decision of our Court in Valson Dyeing (supra) and Godavaridevi Saraf (supra). No submission has been made before us as to why the decision of the other High Courts declaring Rule 8(3A) of the Central Excise Rules, 2002 unconstitutional, should not be accepted by this Court." 4.8 By referring to certain decision learned Authorized Representative emphasized before us that these matters should be remanded back to the original authority for the final decision after the decision of Hon'ble Apex Court in SLP/ Appeal filed by the revenue against the decision of the Hon'ble High Court of Gujarat, or else the matter be kept in abeyance for the same reason. However we are not in agreement with t....
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.... clearances made by the appellant after that date and demand of Rs 4,13,14,846/- for the clearance made during the period 26.03.2013 to 28.02.2014 could have been made by the revenue by invoking provisions of Section 11A of the Central Excise Act, 1944. 4.10 Now we examine the provisions of the law vis a vis the facts in hand to determine the issue in hand. The first issue that needs to be considered is whether the payment of Rs 5,00,000/- the amount of defaulted duty in terms of Rule 8 for the month of January 2013, could have been paid through the CENVAT Account the appellants. In terms of the Proforma of ER-1 reproduced above and the provisions of Rule 8, there appears to be no bar created on utilization of the CENVAT Credit for the payment of defaulted duty. However proviso to Rule 3 (4) of the CENVAT Credit Rule, 2004 provided as follows: "(4) The Cenvat credit may be utilized for payment of - (a) any duty of excise on any final product; or (b) an amount equal to Cenvat credit taken on inputs if such inputs are removed as such or after being partially processed; or (c) an amount equal to the Cenvat credit taken on capital goods if such ca....
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....th or quarter is to be discharged by the 5th of the next month. For this proviso, the cenvat credit allowed to be used is what was in balance on the last date of that month or quarter and not what accrued thereafter. Even in case of duty paid late in terms of rule 8, the credit available for utilization will remain same i.e. the credit in balance on the last date of month or quarter, as the case may be. 5. Further duty payable under rule 8 is on a different footing from duty payable under Section 11A. Duty under Rule 8 is paid after self determination by the assessee unlike Duty payable under Section 11A where generally the duty is determined by the Central Excise officer and the payment is mandated after such determination. There is no time limit prescribed under Section 11A i.e., monthly or quarterly unlike the date prescribed under Rule 8 (i.e., 5th of the next month). Therefore, the restriction on the utilization of the cenvat credit accruing subsequent to the last date of the month or quarter in which the arrears arise, is not applicable to the demands confirmed under Section 11A of the Central Excise Act, 1944." In view of the above clarification issued by the Boa....
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....should be permitted to utilize the Cenvat Credit legally availed during the first 5 days or 6 days of the subsequent month for paying the duty of the excise for the goods cleared in the previous month. 5.2 Even otherwise, proviso to sub-rule (4) of Rule 3 of the Cenvat Credit Rules can be said to be ultra vires to Rule 3(1) of the Cenvat Credit Rules as it does not have any nexus with the object sought to be achieved by the Rules and in fact runs contrary to the principles of Cenvat Credit Rules. At this stage, it is required to be noted that as per catena of decisions of the Hon'ble Supreme Court as well as this Court and other High Courts, Cenvat Credit is indefeasible and there is no correlation of the raw-material and the final product. It is not as if credit could be taken on a final product, which is manufactured out of a particular raw material to which the credit was related. The credit may be taken against excise duty on the final product manufactured on the very day that it becomes available. Thus, as such, credit under the Cenvat Scheme is "as good as tax paid". If any decision is needed on the aforesaid decision of the Hon'ble Supreme Court in the case of Dai I....
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.... 4.14 From the above correspondences it is quite evident that the revenue authorities took nearly one year to give consent to the appellant to operate as an LTU. In the meantime as per the show cause notice certain defaults in term of Rule 8, were noticed in the payment of Central Excise duty by the due date for the Month of February 2013. 4.15 Rule 12 A (4) of the CENVAT Credit Rules permitted the transfer of CENVAT Credit from unit of the person operating under the LTU scheme to the other unit of the same person. Appellant Plant-IX, was having sufficient credit balance of Rs in their CENVAT Account at the close of the February 2013. If they the appellant request to operate under the LTU scheme was allowed during any month prior to the month in which default occurred, they would have transferred this balance to their Plant -VII and would have utilized the same for payment of the duty. In fact appellant's claim that they transferred this amount from their Plant -IX after being accorded the permission to join LTU on 28.02.2013. They utilized this transferred credit for payment of the defaulted duty for the month of February 2013. The delay in according the permission to op....
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....AT account. The demands have been made against them considering that the payment of the defaulted duty for the Month of February-2013 on 26.03.2013 from their CENVAT Account was not a valid payment. Once we hold that the payment from their CENVAT account was valid payment the demands for the subsequent period will automatically be not sustained. However as we have observed in para 4.6 above the fact in regards to transfer of CENVAT Credit of Rs 43,26,000/- by the Plant-IX to Plant -VII needs to be verified by concerned Commissioner. 4.16 It is interesting to note that the show cause notice raises the demand by invoking "Rule 8(3A) of Central Excise Rules, 2002 read with Section 11A of Central Excise Act, 1944." Adjudicating authority has confirmed the demand under the same provisions. If that is so as per para 5 of the Board Circular of 2012, referred to by us earlier after confirmation of the demand these demands can be paid by utilization of the CENVAT Credit. 4.17 Plain reading of Rule 8 (3A) as it was then would clearly show that it is not amenable to Section 11A of the Central Excise Act, 1944. Rule itself declares that in cases where the rule apply, the clearances are t....
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....tive, tribunal has held as follows: "7. In view of the above decision of the Hon'ble Madras High Court and also the fact that Rule 8(3A) is specifically prohibits utilization of Cenvat credit during the period in which default continues, we are of the view that even when the said amount is required to be paid as arrears of revenue the same have to be paid in cash without utilization of the Cenvat credit. Any other interpretation will make the restriction relating to utilization of credit meaningless. It is settled law that what is not allowed directly cannot be allowed/claimed indirectly. Board's Circular dated 28th March, 2012 will not be applicable in view of reasons stated earlier. We, therefore, hold that the appellants are required to pay an amount of Rs. 8,00,09,346 which is equivalent to the Cenvat credit utilized during the period 6-12- 2010 to 4-7-2011 in cash. They will, however, be free to take Cenvat credit of equivalent amount and utilize it for future clearances. Learned Counsel has cited certain judgments of this Tribunal. In view of the above analysis as also the fact that these were delivered before the Hon'ble Madras/Karnataka High Court judgments, we do ....
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....We, therefore, have no hesitation to concur with the reasoning of the Gujarat High Court that Rule 8(3A) is ultra vires of Article 14 on the ground of arbitrariness. 6. Now coming to the challenge to the proceedings initiated by the Department by invoking Rule 8(3A) of the Central Excise Rules, 2002 and the consequential orders passed by the original authority or appellate authority, as the case may be, in demanding duty along with interest, the Gujarat High Court in the case of Precision Fasteners Ltd. v. Commissioner of Central Excise, 2014 - TIOL - 2211 - HC-AHM - CX, has held as follows :- ''4. When the statutory basis for issuance of a show cause notice and raising tax demand is knocked down, the very proceedings would have to be struck down. 5. Learned counsel Shri Oza for the revenue, however, submitted that during the pendency of this petition, the adjudicating authority passed the final order which has not been challenged. He drew our attention to the later portion of the said decision in case of Indsur Global Ltd. (supra) in which this Court even while striking down the portion of sub-rule (3A) of Rule 8, did not disturb the orders passed ....
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....sing referred by the authorized representative, tribunal has in para 4.1, after referring to the order of Hon'ble Gujarat High Court in case of Indsur Global, observed as follows: "A reading of the above paras would clearly indicate that the Hon'ble High Court of Gujarat has only declared "without utilizing the cenvat credit" in Rule 8((3A) as unconstitutional. In fact in para 35 as also the earlier paras, all other provisions of Rule 8(3A) have been considered as correct and perfectly legitimate. Keeping in view the judgment of the Hon'ble High Court of Gujarat, Rule 8(3A) would imply that if the assessee defaults in payment of duty beyond 30 days from the due date, the assessee shall pay excise duty for each consignment at the time of removal till the date the assessee pays the outstanding amount including interest thereon and in the event of any failure, it shall be deemed that such goods have been cleared without payment of duty and the consequences and penalties as provided in these rules shall follow. Thus, as per rule 8(3A) and the judgment of the Hon'ble Gujarat High Court, the appellant was expected to clear the goods for each consignment at the time o....