2015 (5) TMI 603 - MADRAS HIGH COURT

Constitutional validity of Rule 8(3A) of the Central Excise Rules, 2002 - Violation of Article 14 - Held that:- Petitioners-assessees have not illegally or irregularly taken the CENVAT credit. It is to be mentioned herein that sub-rule (1) of Rule 8 provides for the manner of payment of duty on the goods removed from the factory or the warehouse as provided thereunder. Sub-rule (2) of Rule 8 extends the benefit of duty to the third party purchaser, who buys the excisable goods removed by the assessee and such goods are deemed to have suffered duty of excise. Under sub-rule (3) of Rule 8, interest is liable to be paid on the outstanding amount, if the assessee fails to pay the duty by the due date. - The right to pay duty by utilising the CENVAT credit that had accrued cannot be defeated, unless it is a case of illegal or irregular credit (See the decision of the Supreme Court in Dai Ichi Karkaria Ltd., referred [1999 (8) TMI 920 - SUPREME COURT OF INDIA]). 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 - 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 [2014 (12) TMI 585 - GUJARAT HIGH COURT] that Rule 8(3A) is ultra vires of Article 14 on the ground of arbitrariness. - 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 - Decision in the case of Precision Fasteners Ltd., v. Commissioner of Central Excise [2014 (12) TMI 655 - GUJARAT HIGH COURT] followed - Decided in favour of assessee.