TaxTMI 
TaxTMI 
2022 (7) TMI 920
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....Rules, 2002. 5.2 The amount of Rs. 33,78,20,452/- (Rs. 1,92,64,263/- + Rs. 31,85,56,189/-) (Rupees Thirty Three Crore Seventy-eight Lakh Twenty Thousand Four Hundred and Fifty-two only) utilized as Cenvat credit in contravention of Rule 3(4) of Cenvat credit Rules, 2004, is ordered to be denied and recovered through account current under Rule 8(3A) of Central Excise Rules, 2002 read with Section 11A of the Excise Act, 1944. 5.3 Interest at appropriate rate on the said amount is demanded from them under Rule 8(3) of Central Excise Rules, 2002 read with Section 11AA of the Excise Act, 1944. 5.4 Interest amounting to Rs. 4,56,009/- paid is ordered to be appropriated towards interest demanded at para 5.3 above from them under Rule 8(3) of Central Excise Rules, 2002 read with Section 11 AA of the Excise Act, 1944. 5.5 Penalty of Rs. 33,78.20,452/-( Rupees Thirty Three Crore Seventy-eight Lakh Twenty Thousand Four Hundred and Fiftytwo only) is imposed upon them under the provisions of Rule 25 of Central Excise Rules, 2000." 2.1 Appellant is engaged in manufacture of excisable goods falling under Chapter No 39152000, 39239090, 72, 82, 84 of ....
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....of the Central Excise Act, 1944. v. Penalty should not be imposed upon them under the provisions of Rule 25 of Central Excise Rules, 2002. 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 Prakash Shah, 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 January 2013. The duty for the month of January 2013, was to be paid by them as by 6th February. In case they should have paid the defaulted duty along with interest latest by 6th March 2013. In case of any further delay the provisions of Rule 8 (3A) get attracted and they were required to pay the duty in manner as prescribed by the said rule. • Admittedly, from 7.3.2013 to 26.03.2013, the Appellant complied with Rule 8(3A) of the Credit Rules and therefore t....
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....ng outstanding debit of Jan 2013 duty Rs. 1,92,64,263/-' • Hence it is seen that the default amount of Rs 1,92,64,263/- for the month of Jan 2013 has been shown as paid through Cenvat credit account in the month of Mar-2013, which is not admissible. • In view of the foregoing, it appears that duty payable in Current Account for January-2013 not paid by the assessee and such period needs to be treated as default period. It therefore appears that the Central Excise duty of Rs 1,92,64,263/- for January 2013 and Rs. 31,85,36,189/- for the period from 26.03.2013 to 31.12.2013 paid through Cenvat Credit Account is in gross contravention of provisions of Rule 8 (3A) of Central Excise Rules, 2002 read with Rule 3(4) of Cenvat Credit Rules, 2004. • 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 w....
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....td. (2018-TIOL 1207-CESTAT-AHM) and RV Refractories Vs Commissioner of Central Excise Chennai-II (2018-TIOL- 1408 CESTAT-MAD) has remanded to the adjudicating authority to decide the issue on the basis of the outcome of the pending case before the Hon'ble Supreme Court on the appeal 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: "4.2 In order to determine whether the payment of unpaid duty for January 2013 from Cenvat credit account after 06.03.2014 is correct and proper in law it would be essential to preview the constitutionality of Rule 8(3A) of Central Excise Rules, 2002 examined by the Hon'ble Gujarat High Court in the aforesaid case of Indsur Global Ltd. The Court has held that the Rule does not make any distinction between willful defaulter and others and that all cases of default are clubbed together for same treatment and stringent condition of payment of Excise duty without availing Cenvat credit is imposed. That the reasons for non payment of Excise duty c....
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....ose assessees who discharge their tax liability on the due dates prescribed by Government. The other class is of those assessees who do not discharge their tax liability on the due dates prescribed by Government and also within a period of extension of another 30 days. It is this other class which Government aims to penalize in its endeavour to collect Central Excise duties. Central Excise duties are indirect taxes which are collected by the assessee from customers and when they are not paid to the exchequer in the extended period of 30 days subsequent to the following month it clearly point to the motive of defrauding the exchequer. Prior to 2002 it was mandatory to pay excise duties in advance prior to clearance of goods. Even after the relaxation of this procedure and giving ample time to the assessee to collect it from customers and deposit it with Government, if the assessee fails to pay taking shelter of financial hardship it will give rise to a situation where the class of those assessees who discharge their tax liability on the due dates will be discriminated against. This will lead to an anarchical situation and it will become difficult for Government to collect its legiti....
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....cise in nullity and could not be recognized as payment towards duty. The Tribunal also placed reliance on the judgement delivered by the Apex Court in the case of Balwant Singh V. Jagdish Singh [ 2010 (262) E.L.T. 50 (S.C.)] wherein it was held that it must be kept in mind that whenever a law is enacted by the legislature, it is intended to be enforced in its proper perspective. It is an equally settled principle of law that the provisions of a statute, including every word, have to be given full effect, keeping the legislative intent in mind. Further-more it is also a well settled canon of interpretative jurisprudence that the Court should not give such an interpretation to provisions which would render the provisions ineffective or otiose. 4.7 The above view is also found in the judgement delivered in the case of Mauli Steel Pvt. Ltd. V. C.C.E., Aurangabad [ 2014 (314) E.L.T. 158 (Tri.- Mumbai)] : in the case of W.H.Wintech Pvt. Ltd. V.C.C.E., Jaipur-I [ 2014 (314) E.L.T. 532 (Tri.- Del)] and in the case of C.C.E., Chennai-II v. A. R. Metallurgicals Pvt. Ltd. [ 2014 (306) E.L.T. 418 (Mad)] delivered by Madras High Court. 4.8 It is therefore held that the payment....
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....defaulted on payment of duty determine by them for the month of January 2013. The defaulted amount was paid by them by way of debit entry made by them in their CENVAT credit account on 26.03.2013. During the period from 07.03.2013 to 26.03.2013, they cleared the goods on payment of duty in cash, consignment wise as provided for by the Rule 8 (3A) of the Central Excise Rules, 2002. 4.5 Revenues contention is that the payment made by the appellant by way of debit in his CENVAT Account is not proper discharge of defaulted duty for the month of January 2013. Since the default continued even after 26.03.2013, the appellants were required to pay duty consignment wise for the entire period of default. Accordingly a show cause notice dated 31.01.2014 was issued to the appellant asking them to show cause as to why:- a. the clearance effected in the month of January 2013 (duty of Rs. 1,92,64,263) and the clearance effected for the period from 26.03.2013 to 31.12.2013 (duty of Rs. 31,85,56,189/-)should not be treated as clearances without payment of duty in accordance with the provisions of Rule 8(3A) OF Central Excise Rules, 2002; b. the amount of Rs.33,78,20,452/-(Rs. 1....
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....in the manner provided under sub-rule (1) and the credit of such allowed, 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 subrule (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 in....
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....of duty already paid by him. It also is a serious 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....
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....tified in following the judgment of the Madras 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....
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....yment of the defaulted duty for the month of January 2013 as per Rule 8 of the Central Excise Rules, 2002. ii. Whether the rigors of Rule 8 (3A) shall apply to the clearances made by the appellant after that date and demand of Rs 31,85,56,189/- could have been made by the revenue by invoking provisions of Section 11A of the Central Excise Act, 1944. 4.9 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 1,92,64,263/- 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 bein....
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....ment of duty in terms of rule 8 of the Central Excise Rules, 2002, where duty for a particular month 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 Sec....
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....ry and/or in conflict with Rule 8(1) of the Central Excise Rules, 2002. A manufacturer can be and 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 ....
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....ssistance, clarification and grievance redressal for Income Tax, Central Excise and Service Tax matters. ........ " 4.13 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. Para 8 of the show cause notice is reproduced below: "8. The details of duty payment by M/s Supermax Personal Care Pvt Ltd for the period from November 2012 to march 2013 is as under: ER-1 Month Defaulted Amount Amount paid with interest through PLA A/c Balance Amount remained to be paid by PLA A/c Nov- 2012 21979828 Nil 21979828 Dec- 2012 28991453 Nil 28991453 Jan- 2013 19264263 21979828 (Nov) 499932 (Int) 19264263 (Jan) + 28991453 (Dec) Feb- 2013 Nil Nil 19264263 (Jan) + 28991453 (Dec) Mar- 2013 Nil 28991453 (Dec) 1057989 (Int Dec) 456009 (Int Jan) 19264263 (Jan)* *Default amount of Rs 19264263/- for the month of Jan-2013 has been shown as paid through CENVAT credit acco....
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....to the credit of the assessee in its Cenvat account and secondly he in fact did pay the amount claiming that the short payment was due to oversight. 4. Having regard to these facts and the circumstance that Rule 8(3A) itself has been struck down and is no longer in existence, which we entirely concur with, we find no infirmity with the CESTAT's order. No question of law arises. The appeal is consequently dismissed." 4.14 In view of the above we do not find any justification in holding that the payment of amount of Rs 1,92,64,263/- from their CENVAT account was not enough to discharge the duty arrears for the month of Jan-2013 in terms of Rule 8 of the Central Excise Rules, 2013. 4.15 Undisputedly appellants have discharged the duty as demanded in the show cause notice and confirmed against them for the subsequent period from their CENVAT account. The demands have been made against them considering that the payment of the defaulted duty for the Month of Jan-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 sustai....
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....aulter by way of initiation of proceedings for short/ nonpayment of duty in terms of Section 11A of the Central Excise Act, 1944. This short/ non-payment cannot tiger the Rule 8 (3A) automatically into action. In our view Rule 8 (3A), as it existed then provided a mechanism for ensuring the payment of the admitted duty liability of the month by the due date as per Rule 8. In the present case admittedly during the period of default appellants have acted as per the provisions of Rule 8 (3A) and have discharged duty consignment wise without utilizing the CENVAT Credit available with them. 4.18 In the case of Sharp Industry referred in impugned order and relied upon by the authorized representative, 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 cred....
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....cision of the Supreme Court in Dai Ichi Karkaria Ltd., referred supra). To that extent, we find this sub-rule (3A) arbitrary and therefore violative of Article 14. The right that has accrued to an assessee by way of Cenvat credit, that is duty paid on the inputs, cannot be taken away under a rule, which only provides for the manner and method of payment of duty and for levying of interest, if there is a default. The object of the term "without utilizing the Cenvat credit'' would run counter to the scheme of availment of the Cenvat credit on the duty paid inputs. It is a legitimate right that has accrued to an assessee and that cannot be denied arbitrarily under the provision under challenge. 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 Precis....
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....ent case. The impugned tax demands and show cause notice are set aside. Resultantly, all subsequent actions, if any, taken by the department would be set at naught. Petition is allowed. Rule is made absolute accordingly.'' 7. In the light of the aforesaid judgment of the Gujarat High Court, to which view we are agreeable, all the proceedings initiated by the Department in respect of the respective assessees, invoking the said rule by demanding duty along with interest by denying the benefit of Cenvat credit have to be necessarily set aside. Accordingly, the impugned proceedings are set aside. In the result, all the writ petitions are allowed." 4.19 In the case of Shivam Pressing 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 l....