TaxTMI 
TaxTMI 
2023 (5) TMI 1078
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....nd. (ii) I order recovery of interest under Section 11AB (Section 11AA w.e.f. 08-04-2011) of CEA, 1944 on the above amount. The interest of Rs. 11,54,875/- paid by the assessee against defaulted amount is appropriated. (iii) Under Section 11AC of CEA, 1944, I impose penalty of Rs.1,76,55,000/- on the assessee. Assessee should note that as per first proviso to Section 11AC of CEA, 1944, if the duty as confirmed by this order and the interest payable thereon are paid within thirty days from the date of receipt of this order, the amount of penalty imposed under Section 11AC liable to be paid by them shall be twenty five per cent of the duty confirmed provided the reduced penalty is also paid within 30 days of receipt of this order. (iv) I drop the proposal for disallowing credit of Rs.80,99,532/- However I confirm the demand of Rs. 80,99,532/- under proviso to Section 11A(1) (Section 11A(4) w.e.f 08-04-2011) and hold that above duty stands paid by the assessee by utilization of cenvat credit on 5.10.2011. (v) I order recovery of interest under Section 11AB (Section 11AA w.e.f. 08-04-2011) of CEA, 1944 on the above amount of Rs. 80,99,532/-. The interest is to be calculated....
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....ount of duty should not be recovered in account current i.e. from PLA account under the provisions of Rule 8(3A) of CER, 2002 read with proviso to then Section 11A(1) of CEA, 1944 and now Section 11A(4) of CEA, 1944 w.e.f 08-04-2011. iii) Interest should not be charged and recovered from them under provisions of Section 11AB (Section 11AA w.e.f. 08-04-2011) of CEA, 1944 and the amount of Rs. 8,42,540/- paid by the assessee should not be appropriated against such demand of interest. iv) Penalty should not imposed on them under the provisions of Section 11AC of CEA, 1944 for intentionally misleading the department by willfully mis- stating the facts with intent to evade the Central Excise duty. The show cause notice also proposed imposition of penalty under Rule 26 (1) of CER, 2002 on both the Directors.' 2.4 The show cause has been adjudicated by the commissioner as per the impugned order. 2.5 Aggrieved by the penalty imposed as per the impugned order both the directors of the company have filed appeals. 2.6 Revenue has also filed an appeal with following question of question of law 'The demand of Rs. 80,99,532/- should not have been ordered for recovery through PLA/C....
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....ny excisable goods. As per Rule 7, if an assessee is unable to determine the value of excisable goods or determine the rate of duty applicable, he may request the Assistant Commissioner of Central Excise or the Deputy Commissioner in writing giving reasons for payment of duty on provisional basis upon which such authority would make an order allowing payment on provisional basis at such rate or on such value as may be specified. 19. Rule 8 of the Central Excise Rules pertains to the manner of payment. Sub-rule (1) of Rule 8 requires that the duty of the goods removed from the factory or the warehouse during a month shall be paid by the 6th day of the following month, if the duty is paid electronically through internet banking and by the 5th day of the following month, in any other case. First proviso to sub-rule (1) provides that in case of goods removed during the month of March, the duty shall be paid by the 31st day of March. Relevant portion of subrule (1) of Rule 8 reads as under : "Rule 8. Manner of payment - (1) The duty on the goods removed from the factory or the warehouse during a month shall be paid by the 6th day of the following month, if the duty is paid electro....
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....ule (3A) reads as under : "(3A) If the assessee fails to pay the duty declared as payable by him in the return within a period of one month from the due date, then the assessee is liable to pay the penalty at the rate of one per cent. on such amount of the duty not paid, for each month or part thereof calculated from the due date, for the period during which such failure continues." It can thus be seen that with the substitution of sub-rule (3A) of Rule 8, the requirement of the defaulter to clear the goods on payment without availing Cenvat credit has been done away with. Instead, such an assessee would invite penalty at the rate of one per cent for each month or part thereof calculated from the due date. 21. From the statutory provisions, it can be seen that ordinarily as per Rule 4, duty on excisable goods is payable on removal. Such payment is to be made in the manner prescribed in Rule 8. Sub-rule (1) of Rule 8 provides for a facility of deferred payment of excise duty. Instead of an assessee paying duty on removal of each consignment, the duty is to be paid for the entire month by the due date which is the 6th day of the following month if the duty is paid electronicall....
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.... product on payment of excise duty without availing the Cenvat credit. We may consider the petitioner's challenge to the vires of such rule in the background of the statutory scheme. Before doing so, however, we may examine the parameters on which a delegated legislation can be called in question. It is by now well settled that a legislation enacted by the Union or the State Legislature enjoys a presumption of constitutionality. Heavy burden is one who questions its constitutionality to establish the same through cogent materials. A reference in this respect can be made to a Constitution Bench decision of the Supreme Court in the case of State of Jammu & Kashmir v. Triloki Nath Khosa - AIR 1974 SC 1. It is also well settled that the principle of presumption of constitutionality also applies to a delegated legislation. In the case of St. Johns Teachers Training Institute v. Regional Director, National Council for Teacher Education - (2003) 3 SCC 321, it was observed that "it is also well settled that in considering the vires of subordinate legislation one should start with the presumption that it is intra vires and if it is open to two constructions, one of which would make it valid....
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....leness which invalidates a bye-law is not the antonym of "reasonableness" in the sense of which that expression is used in the common law, but such manifest arbitrariness, injustice or partiality that a court would say : 'Parliament never intended to give authority to make such rules; they are unreasonable and ultra vires....' If the courts can declare subordinate legislation to be invalid for 'uncertainty,' as distinct from unenforceable ..........this must be because Parliament is to be presumed not to have intended to authorise the subordinate legislative authority to make changes in the existing law which are uncertain....." xxxx "77. In India arbitrariness is not a separate ground since it will come within the embargo of Article 14 of the Constitution. In India any enquiry into the vires of delegated legislation must be confined to the grounds on which plenary legislation may be questioned, to the ground that it is contrary to the statute under which it is made, to the ground that it is contrary to other statutory provisions or that it is so arbitrary that it could not be said to be in conformity with the statute or that it offends Article 14 of the Constitution." 26.....
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.... that the purposes enumerated in various clauses under the said sub-section are without prejudice to the generality of the powers flowing from sub-section (1). If, therefore, any rule is framed which would be otherwise within the legislative competence in view of the authority given to the Government under sub-section (1) to carry into effect the purposes of the Act, such rule cannot be targeted as being outside of a particular clause contained in sub-section (2) of Section 37. We must notice that Rule 8 and sub-rule (3A) thereof is not a charging provision. It is a mechanism for collection of tax already become due and payable. Had any new tax been levied or charge or penalty created under such rule, the question of falling back on the general power where specific provisions excluded, such a power would arise. Further, clause (ib) of sub-section (2) of Section 37 authorizes the Government to frame rules to provide for the assessment and collection of duties of excise, the authorities by whom functions under the Act would be discharged, the issue of notices requiring payment, the manner in which the duties shall be payable and the recovery of duty not paid. This clause thus gives a....
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.... of duty by the 5th or the 6th day of month following the previous month of clearance is not fulfilled by an assessee that the stringent requirement of collection of duty on each consignment and withdrawal of the facility of Cenvat credit follows. These are undoubtedly stringent provisions provided to deal with the class of assessees who are unable to pay the duty in time. 29. This brings us to the last limb of the petitioner's contention, namely, that the condition attached by sub-rule (3A) of Rule 8 is unreasonable and therefore, violative of Article 14 of the Constitution and amounts to serious restriction on the petitioner's right to carry on trade or business of his choice guaranteed under Article 19(1)(g) of the Constitution. This contention requires a closer scrutiny. As noted earlier, the restrictions of sub-rule (3A) come in two folds. Firstly, a defaulter assessee has to clear the consignments on spot payment of excise duty and secondly, that such excise duty has to be paid in cash without availing Cenvat credit. This rule does not make any distinction between the willful defaulter and the others. Though term 'willful defaulter' has not been defined in the statute, the....
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....vade duty. 30. It can be seen that the reasons for non-payment of excise duty can be manifold and not necessarily in all cases have to be willful default by an assessee despite availability of funds. Excise duty may remain unpaid due to economic reasons, due to slowness in the business or due to financial crunch temporarily felt by the manufacturer who though might have cleared the finished goods and also sold the goods in the market may not have received the payment as promised. All such cases of defaults willful or otherwise are clubbed together for the same treatment and a stringent condition of payment of excise duty without availing Cenvat credit is imposed. It can be appreciated that where a manufacturer falls behind the payment schedule on account of financial constraints, such as, slowing down of business, competition in the market reducing the profit margins, promised payments from the purchasers not coming forth or temporary labour disputes, would find it extremely difficult thereafter to raise further funds for payment of duty in addition to the duty which he has already paid. Cenvat credit is available to a manufacturer upon purchase of inputs which are duty paid. It....
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....Supreme Court struck down the rule further observing that if on the inputs the assessee had already paid the taxes on the basis that when the goods are utilized in the manufacture of further products as inputs thereto then the tax on those goods gets adjusted which are finished subsequently. Thus a right had accrued to the assessee on the date when they paid the tax on the raw materials or the inputs and that right would continue until the facility available thereto gets worked out or until those goods existed. We may also recall that in the case of Dai Ichi Karkaria Ltd. (supra) it was reiterated that a manufacture obtains credit for the excise duty paid on raw material to be used by him in the production of an excisable produce immediately it makes the requisite declaration and obtains an acknowledgment thereof. It is entitled to use the credit at any time thereafter when making payment of excise duty on the excisable product. 32. As held by the Supreme Court in the case of Chantamanrao (supra), the phrase "reasonable restriction" connotes that the limitation imposed on a person in enjoyment of the right should not be arbitrary or of an excessive nature, beyond what is require....
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....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 for penalty at the rate of 1% per month on delayed payment of duty. 36. In the result, the condition contained in sub-rule (3A) of Rule 8 for payment of duty without utilizing the Cenvat cr....