TaxTMI 
TaxTMI 
2026 (7) TMI 325
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....l Ltd. v. Union of India reported in 2014 (310) ELT 833 (Guj), the CESTAT in the impugned order has held that the portion without utilizing the CENVAT Credit of sub-rule (3A) of Rule 8 of the Central Excise Rules, 2002, shall be rendered invalid and observed as under :- "2. After hearing both the sides and on perusal of the records, we find that the appellants were engaged in the manufacture of Meter Gauge classifiable under Chapter 73 & 84 of Central Excise Tariff Act. 1985. The appellants were discharging duty on monthly basis under Rule 8 of Central Excise Rules, 2002. There was a delay in discharging of duty on monthly basis. The appellant paid duty partly from CENVAT account during the defaulted period. By the impugned order, the Adjudicating Authority disallowed the utilization of the amount from CENVAT account during the period from 05.07.2010 to 29.09.2010 in terms of provisions of Rules 8(3A) of Central Excise Rules, 2002 and confirmed the demand of duty along with interest and penalty partly for not paying the amount by cash from PLA. We find that the Hon'ble Gujarat High Court in the case of Indsur Global Ltd. Vs. Union of India 2014 (310) ELT 833 (Guj.) held th....
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....le goods, detail provisions have been made in the Cenvat Credit Rules, 2004. Rule 3 thereof pertains to cenvat credit. Sub-rule (1) thereof allows a manufacturer or purchaser of final products or provider of output service to take credit of cenvat of the various duties specified in clauses (i) to (xi) contained therein. Rule 4 of the Cenvat Credit Rules, 2004 lays down conditions for allowing cenvat credit. Sub-rule (1) thereof provides that cenvat credit in respect of inputs may be taken immediately on receipt of the inputs in the factory of the manufacturer or in the premises of the provider of output service. Clause (1) of sub-rule (2) pertains to availability of cenvat credit in respect of capital goods and provides that in respect of capital goods received in a factory or in the premises of the provider of output service at any point of time in a given financial year shall be taken only for an amount not exceeding fifty per cent of the duty paid on such capital gods in the same financial year. There are provisos to this clause with which we are not concerned. Clause (b) of sub-rule (2) provided that balance of cenvat credit may be taken in any financial year subsequent to the ....
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.... following month, if the duty is paid electronically through internet banking and by the 5th day of the following month, in any other case: Provided that in case of goods removed during the month of March, the duty shall be paid by the 31st day of March." Sub-rule (2) of rule 8 provides that the duty of excise shall be deemed to have been paid for the purposes of these rules on the excisable goods removed 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: ....
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.... the due date which is the 6th day of the following month if the duty is paid electronically through internet banking and in all other cases, it would be the 5th day of the following month. It is in this context, therefore, under sub-rule (2) of rule 8, it is provided that the duty of excise shall be deemed to have been paid for the purpose of the rules on the excisable goods removed in the manner provided under sub-rule (1) and the credit of such duty shall be allowed as provided under the rules. Combined reading of rule 4 with rule 8(1) and 8(2) of the Central Excise Rules would demonstrate that ordinarily excise duty is payable on removal. In terms of sub-rule (1) of rule 8, deferment is granted by the Legislature and if duty is paid accordingly, as per sub-rule (2) of rule 8, the same would be deemed to have been paid on removal and the assessee would be entitled to credit of such duty as allowed under any rule. 22. Sub-rule (3) of rule 8 attaches a liability of paying interest on delayed payment of excise duty. Any assessee who fails to pay duty by the due date would be liable to pay outstanding amount with interest at the rate specified by the Central Government unde....
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....that it is intra vires and if it is open to two constructions, one of which would make it valid and other invalid, the Courts must adopt that construction which makes it valid...." 25. As held by the Supreme Court in case of A.P. v. McDowell & Co., (1996) 3 SCC 709, a law made by the Parliament or the State Legislature can be struck down on two grounds only, namely, lack of legislative competence or violation of any of the fundamental rights guaranteed in part III of the Constitution or any other constitutional provisions. However, the subordinate legislation does not enjoy the same level of immunity from the court's scrutiny. In addition to the two grounds available for challenge to a legislation by the Parliament or the State Legislature, a delegated legislation can be struck down also on other grounds such as, that it is ultra vires the parent Act, the provisions are in conflict with the parent Act or that the same is unreasonable or wholly arbitrary or irrational. In the case of Indian Express Newspapers (Bombay) Pvt. Ltd. v. Union of India, (1985) 1 SCC 641, the Supreme Court observed as under: "75. A piece of subordinate legislation does not carry the same d....
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....r that it offends Article 14 of the Constitution." 26. With these parameters in mind, we may consider the petitioner's ground for challenge. Adverting to the question of lack of power to frame such rule, we may notice that section 37 of the Central Excise Act, 1944 is the rule making power contained in the said Act. Sub-section (1) thereof provides that the Central Government may make rules to carry into effect the purposes of the Act. Sub-section (2) of section 37 lists the various purposes for which such rules may provide. It begins with the expression "in particular and without prejudice to the generality of the foregoing power, such rules may ---". Relevant clauses of sub-section (2) of section 37, for our purpose, are the following : "(ib) provide for the assessment and collection of duties of excise, the authorities by whom functions under this Act are to be discharged, the issue of notices requiring payment, the manner in which the duties shall be payable, and the recovery of duty not paid' (ibb) provide for charging or payment of interest in the differential amount of duty which becomes payable or refundable upon finalisation of all or any class o....
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....h the duties shall be payable and the recovery of duty not paid. This clause thus gives ample power to the Government to make rules for providing a mechanism for assessment and calculation of duties of excise, the authorities who would carry out such functions, the manner of payment of duty and most importantly, recovery of duty not paid. The fact that sub-rule (3A) of rule 8 provides for the mechanism of duty unpaid is beyond cavil. It is precisely when an assessee who was given the facility of deferring the payment of duty beyond the clearance has not been able to pay the same by the due date and further defaults by another 30 days thereafter that sub-rule (3A) of rule 8 would apply. It enforces the recovery to be made thereafter in a particular manner. Very clearly, the said provision is not beyond the rule making power of the sub-ordinate legislature. 28. The second contention of the petitioner that the provision creates a hostile discrimination treating equals as unequals needs to be rejected out of hand. Sub-rule (3A) of rule 8 recognizes two distinct and different classes of assessees. As long as an assessee abides by the time-frame provided in sub-rule (1) of rule ....
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....l defaulter and the others. Though term 'willful defaulter' has not been defined in the statute, the concept is not an unknown one. Section 11AC of the Central Excise Act provides for penalty in case of non-levy, short levy or non-payment or short payment or erroneous refund of the duty where the same is occasioned by reason of fraud or collusion or any willful misstatement or suppression of facts or contravention of any of the provisions of the Act or the rules made thereunder with an intent to evade payment of duty. Likewise, section 11A which pertains to recovery of duties not levied or not paid or short levied or short paid or erroneously refunded makes a clear distinction when it gives the period of limitation available to the department to institute proceedings, in such cases between such non-payment having been occasioned due to fraud, collusion, etc. in which case a longer period of limitation is available as against rest of the cases. Likewise, under rule 12CC of the Central Excise Rules as it stood at the relevant time, power was given to the Government by notification to withdraw facilities from the manufacturers, registered dealers or exporters under certain circumstanc....
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.... 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 is the duty element which the assessee has already sufiered which is credited to his cenvat credit account available to him for adjustment for payment of excise duty liability upon clearance of the finished product. If such facility is withdrawn, it could be appreciated, his ability to continue the business under such adverse financial climate would further diminish. This would be a cyclical vicious pattern where in every month he would fall behind by the due date unable to raise cash flow for payment of duty for the clearance which he desires to make and is therefore further saddled with the burden of paying such duty in cash without availing CENVAT credit. This rule thus imposes a wholly unreasonable restriction which is not commensurate with the wrong sought to be remedied. 31. This extreme hardship is not the only element of unreasonableness of this provision. It essentially prevents an assessee from availing cenvat credit of the duty already paid and thereby suspends, if not withdraws, his right to take credit of the duty alr....
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....on" 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 required in the interests of the public. Legislation which arbitrarily or excessively invades the right cannot be said to contain the quality of reasonableness and unless it strikes a proper balance between the freedom guaranteed in Article 19(1)(g) and the social control permitted by clause (6) of Article 19, it must be held to be wanting in that quality. 33. In the case of Om Kumar (supra), the Supreme Court recognized the applicability of the principle of proportionality in judging the validity of a provision on the touchstone of reasonableness under Article 14 of the Constitution. It was observed: "53. Now under Art. 19(2) to (6), restrictions on fundamental freedoms can be imposed only by legislation. In cases where such legislation is made and the restrictions are reasonable yet, if the concerned statute permitted the administrative authorities to exercise power or discretion while imposing restrictions in individual situations, question frequently arises whether a wrong choice is made by the Administrator for impos....