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M/s. Varadhalakshmi Mills Ltd. And M/s. Sona Rajendra Spinners (P) Ltd. Versus CCE, Madurai And CCE & ST, Salem

2016 (4) TMI 15 - CESTAT CHENNAI

Demand under Rule 8(3A) - 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? - Held that:- The Hon'ble High Court of Madras in the recent judgement in the case of Malladi Drugs & Pharmaceuitcals Ltd. Vs UOI (2015 (5) TMI 603 - MADRAS HIGH COURT ) and A.R. Metallurgicals Pvt. Ltd. (2015 (5) TMI 661 - MADRAS HIGH COURT ) decided batch of writ petitions and .....

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JUDICIAL MEMBER For the Petitioner : Ms. L. Mythili, Advocate For the Respondent : Shri B. Balamurugan, AC (AR) ORDER PER P. K. CHOUDHARY M/s. Varadhalakshmi Mills Ltd. and M/s. Sona Rajendra Spinners (P) Ltd. filed these appeals and the issue involved in both the appeals relates to demand under Rule 8(3A), both are taken up together for disposal. Appeal : E/1107/2003 2. The brief facts of the case are that the appellants are manufacturers of Cotton yarn falling under CH 52 and man made staple f .....

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ing authority confirmed the demands proposed under the SCN and imposed a penalty of ₹ 14,000/- under Rule 173Q read with Rule 25 of CER, 2001. On appeal, the Commissioner (Appeals) dismissed the appeal for lack of merits. Appeal No. E/1033/2005 3. The brief facts of the case are that the appellants are manufacturers of Cotton yarn falling under CH 52 and man made staple fibre yarn falling under 55 of CETA, 1985 and are required to pay excise duty on fortnightly basis in accordance with Rul .....

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uced the equivalent penalty to ₹ 1,00,000/- and rejected the appeal. 4. Heard both sides. Both the Ld. Counsel, Shri K.S. Venkatagiri, Advocate and Ms. Mythili, Advocate, appeared on behalf of the appellants summarised the facts and submitted that the demand under Rule 8(3A) is no more valid as Hon'ble High Court has struck down the Rule 8(3A) as unconstitutional. It is submitted that the Hon'ble Gujarat High Court in the case of Indsur Global India Vs UOI 2014-TIOL-2115-HC-AHM-CX .....

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the writ petitions. He also submits that the Hon'ble High Court of Madras in the case of A R Metallurgicals P. Ltd. Vs CCE Chennai - 2011-TIOL-201-CESTAT-MAD. The counsel also submitted that subsequently Hon'ble Madras High Court in the case of A.R. Metallurgicals Pvt. Ltd. Vs CESTAT & Others - 2015-TIOL-1261-HC-MAD-CX set aside the Tribunal's Final Order No.1105/2010 dt.21.10.2010 reported in 2011-TIOL-201-CESTAT-MAD and allowed the writ petitions and held in favour of assessees .....

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ubmitted that in the present appeals adjudicating authority has not only invoked Rule 8(3A) but also other Rules 8(1), 8(3) and Rule 6 have been invoked and also penalty provisions have been invoked. He also submitted that wherever the appellants have paid the duty amount in P.L.A subsequently cenvat credit has been allowed as re-credit. 6. After hearing both sides, we find that the issue in all these appeals relates to whether appellants have not paid central excise duty on consignment basis du .....

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ons and struck down Rule 8(3A) as ultra vires and allowed the writ petitions of assessees. The Hon'ble High Court of Madras in their order concurred the Gujarat High Court judgement in the cases of Indusur Global Ltd. and Precision Fasteners Ltd (supra). The relevant paragraphs of the High Court, Madras in the case of Malladi Drugs & Pharmaceuticals Ltd. are reproduced as under :- This batch of writ petitions challenges the constitutional validity of Rule 8(3A) of the Central Excise Rule .....

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anding amount including interest thereon and in the event of any failure, it shall be deemed that such goods have been cleared without payment of duty and the consequences and penalties as provided in these rules shall follow.'' ... ... ... 2. The primary ground of challenge made in this batch of writ petitions is that Rule 8(3A) of the Central Excise Rules,2002 is unconstitutional, totally arbitrary, irrational, oppressive and contrary to the power delegated to the rule making authority .....

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39;36. In the result, 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 declared unconstitutional. Therefore, the portion ''without utilizing the Cenvat credit'' of sub-rule (3A) of Rule 8 of the Central Excise Rules, 2002, shall be rendered invalid.'' ... ... .... 5. It is not the case of the Department in this batch of writ petitions that the petit .....

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aid on the outstanding amount, if the assessee fails to pay the duty by the due date. In contradiction to this procedure, sub-rule (3A) of Rule 8 provides that in default of the payment of duty beyond thirty days from the due date as prescribed under sub-rule (1), notwithstanding anything contained in sub-rule (1) and sub-rule (4) of Rule 3 of CENVAT Credit Rules, 2004, the assessee is bound to pay excise duty at the time of removal without utilizing the CENVAT credit till the date the assessee .....

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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 .....

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d as follows:- ''4. When the statutory basis for issuance of a show cause notice and raising tax demand is knocked down, the very proceedings would have to be struck down. 5. Learned counsel Shri Oza for the revenue, however, submitted that during the pendency of this petition, the adjudicating authority passed the final order which has not been challenged. He drew our attention to the later portion of the said decision in case of Indsur Global Ltd. (supra) in which this Court even while .....

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decision. He had, along with rule, also challenged the show cause notice. In the case of Indsur Global Ltd. (supra) the petitioner had unsuccessfully challenged the order of the adjudicating authority. The appeal was dismissed by the Commissioner on the ground of delay beyond his power to condone. The Tribunal had dismissed further appeal on the ground of gross delay of three years in preferring the appeal before the Tribunal as also on the ground that in any case the Commissioner was right in n .....

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that the benefit of declaration of invalidity of the rule would be available to the petitioner in other pending proceedings. 7. In view of such clear distinction in facts, the modus adopted in the said case in case of Indsur Global Ltd., (supra) cannot be applied in the present 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.' .....

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& 1 of 2013 are closed. However, there is no order as to costs." In the above case, the assessees filed writ petitions before Hon'ble High Court challenging the provisions of Rule 8 (3A) of CER. Subsequently, the Hon'ble Madras High Court in the case of A.R. Metallurgicals Pvt. Ltd. (supra) has set aside this Tribunal's Final Order No.1105/2010 dt. 21.10.2010 [2011-TIOL-201-CESTAT-MAD]. The relevant para of the Hon'ble Madras High Court's order is reproduced as under .....

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ee pays the outstanding amount including interest is unconstitutional and that the subsequent proceedings initiated by the Department for demanding tax were set at naught, which were followed by us in a batch of writ petitions in W.P.Nos.2506 of 2011 etc., dated 27.3.2015 (M/s Malladi Drugs & Pharmaceuticals Ltd., Ranipet etc., etc., v. Union of India rep. by its Secretary, Ministry of Finance etc.) deciding the issue in favour of the assessees therein for the reasons stated therein, followi .....

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