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2015 (8) TMI 99 - CESTAT CHENNAI

2015 (8) TMI 99 - CESTAT CHENNAI - TMI - Demand of excise duty by cash under rule 8(3A) of CER - contravention of Rule 8 (1), 8(3) and 8(3A) of Central Excise Rules, 2002 and Rule 3 (4) of CCR 2004 - appellants defaulted payment of duty on consignment basis through PLA - penalty under rule 25 and Rule 15 - whether appellants have not paid central excise duty on consignment basis during default period and also utilized cenvat credit for payment of duty against the provisions of Rule 8 (3A) of CER .....

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8(3A) as unconstitutional. The jurisdictional Hon'ble Madras High Court's ruling is binding on the jurisdictional adjudicating authority and also binding on this Tribunal. By respectfully following the ratio of the Hon'ble High Court orders referred to supra, we hold that demand of duty under Rule 8(3A) is unsustainable as the said Rule has been struck down by the Hon'ble High Court and the demand of duty and penalty imposed in the impugned orders is liable to be set aside - Decided in favour of .....

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E/40187/2015, E/490/2011, E/41387/2013, E/41388/2013, E/41398/2015, E/42334/2013, E/40680/2014, E/S/41327/2014 & E/41093/2014 Appellant M/s. Texcel International Pvt. Ltd. have filed stay petition E/S/40512/2013 & E/40724/2013. Since the issues involved in these 27 appeals are identical in nature relating to demand of excise duty by cash under rule 8(3A) of CER, after disposing the stay application filed by M/s.Texcel International Pvt. Ltd. the appeals are taken up together for disposal .....

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s through PLA and the duty paid through cenvat credit should be treated as improper duty payment. The lower authorities confirmed the demand and also appropriated the amounts paid through P.L.A. The adjudicating authority also imposed penalty under rule 25 and Rule 15 and also ordered for interest. All the appeals listed above are on identical issues except few variations in the cases where some of the appellants have paid the duty subsequently through P.L.A. also and in certain cases appellants .....

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n Rule 8 (3A) of Central Excise Rules, 2002 for payment of duty without utilizing cenvat credit is unconstitutional. He also submits that Hon'ble High Court of Madras in a batch of writ petitions in the recent order in the case of Malladi Drugs & Pharmaceuticals Ltd. - 2015-TIOL-1262-HC-MAD-CX concurred with the judgements of Hon'ble Gujarat High Court cited supra and allowed the writ petitions. He also submits that the Hon'ble High Court of Madras in the case of A R Metallurgica .....

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ents cited supra. He prayed that since the Hon'ble Gujarat High Court and the Hon'ble Madras High Court have struck down the Rule 8(3A) of CER 2002, the demand, interest and penalty confirmed in the impugned orders be set aside and the appellant-assessee's appeal may be allowed. 4. The Ld. Advocates/Counsels appearing for the other appellants reiterated the same and affirmed that the issues are identical and pleaded to set aside the order in view of recent High Court order. 5. Ld. A. .....

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er appellants have not paid central excise duty on consignment basis during default period and also utilized cenvat credit for payment of duty against the provisions of Rule 8 (3A) of CER. Adjudicating authority invoked the provisions of Rule 8 (3A) of CER 2002 and confirmed the demands and also appropriated the amount already paid in P.L.A. towards payment of duty. The Hon'ble High Court of Madras in the recent judgement in the case of Malladi Drugs & Pharmaceuitcals Ltd. Vs UOI (supra) .....

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es the constitutional validity of Rule 8(3A) of the Central Excise Rules, 2002, which was introduced with effect from 1.6.2006, and the said Rule reads as follows:- ''8(3A). 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, withou .....

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essive and contrary to the power delegated to the rule making authority. Several facets of the challenge to the said rule was considered by a Division Bench of the Gujarat High Court in the case ofIndsur Global Ltd., v. Union of India, 2014 (310) E.L.T.833 (Guj.) = 2014-TIOL-2115-HC-AHM-CX, wherein the Court declared that the condition contained in sub-rule (3A) of Rule 8 for payment of duty without utilizing the CENVAT credit till an assessee pays the outstanding amount including interest is un .....

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e case of the Department in this batch of writ petitions that the petitioners-assessees have 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 d .....

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removal without utilizing the CENVAT credit till the date the assessee pays the outstanding amount including interest thereon. 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 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 CENVA .....

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refore, 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 .....

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on 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 by the revenue authorities as upheld by the Tribunal, since such dispute had achieved finality. Counsel would urge that in the present case also the same course should be adopted. 6. In our opinion, however, there is vital difference between the two sets of facts. In the present case, the petitioner had raised the challenge to the statuto .....

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as also on the ground that in any case the Commissioner was right in not entertaining the appeal of the assessee which was presented along with the application for condonation of delay after the maximum period which the Commissioner could have condoned. It was in this background the Court held that the issues which are closed cannot be reopened. It was noted that there were other proceedings between the same assessee and department pending at various stages on same issue. It was, therefore, pro .....

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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 all .....

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of the Hon'ble Madras High Court's order is reproduced as under :- "4. Since the issue raised in this civil miscellaneous appeal has already been decided by the Gujarat High Court in the judgments in Indsur Global Ltd., v. Union of India, 2014 (310) E.L.T.833 (Guj.) = 2014-TIOL-2115-HC-AHM-CX and in Precision Fasteners Ltd., v. Commissioner of Central Excise, 2014-TIOL-2211-HC-AHM-CX, declaring that the condition contained in sub-rule (3A) of Rule 8 of the Central Excise Rules, 2002 .....

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