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2016 (5) TMI 746 - CESTAT ALLAHABAD

2016 (5) TMI 746 - CESTAT ALLAHABAD - TMI - Demand of duty and imposition of penalty - Rule 25 of CCR read with section 11 AC of the Act - Restriction on utilisation of Cenvat credit as provided under Rule 8 (3A) of CER - Held that:- the issue is no longer res integra as it is evident that Hon'ble Gujarat High Court in the case of Indsur Global Limited Vs. Union of India [2014 (12) TMI 585 - GUJARAT HIGH COURT], the portion of the Rule "without utilising the Cenvat credit" of sub Rule 3(A) of Ru .....

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in default in payment of duty in part for the period January,2012 and February, 2012 and the default amount had been made good with interest on 4/3/12 where the utilisation of Cenvat credit could be disallowed and the same again demanded in cash along with interest and equal amount of penalty under rule 25 of CCR read with Rule 8 (3A) and section 11 AC of the Act. 2. The brief facts are that on the scrutiny of ER-I Returns for the month of January, 2012 and February, 2012, the appellant had not .....

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6 7 8 9 Jan.2012 3,93,892 (382420+7649+3823) 0 2,22,834 (2,16,545+4194+2095) 2,22,834 (2,16545+4194+2095) 1,71,058 (1,65875+3455+1728) 04.03.12 1,39,784 (135029+3162+1593) on 10.03.12 alongwith the interest of ₹ 2758 31,274 (30,846+293+135) Feb.2012 5,08,397 0 2,63,793 2,63,793 2,44,605 04.03.12 2,44,605 On 23.03.12 alongwith the interest of ₹ 3010 0 2.1 It appeared to revenue that the appellant could not have utilised the Cenvat credit as provided under Rule 8 (3A) of CER and accord .....

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impugned order, was pleased to reject the appeal. 4. Being aggrieved the appellant assessee is in appeal before this Tribunal. The ld. Counsel for the appellant urges that the issue is no longer res-integra. In the case of Indsur Global Limited Vs. Union of India: 2014 (310) ELT 833 (Guj.). The Honourable Gujarat High Court in the Writ Petition vide its order dated 27/11/2014 have held as follows: "29.This brings us to the last limb of the petitioner's contention, namely, that the cond .....

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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 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 .....

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ollusion, 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 circumstances having regard to the extent of evasion of duty, nature and type of offences or such other factors as has been relevant. In exercise of such powers, Noti .....

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) taking of CENVAT credit without the receipt of goods specified in the document based on which the said credit has been taken; (d) taking of CENVAT credit on invoices or other documents which a person has reasons to believe as not genuine; (e) issue of excise duty invoice without delivery of goods specified in the said invoice; (f) claiming of refund or rebate based on the excise duty paid invoice or other documents which a person has reason to believe as not genuine." This Rule 12CC as we .....

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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 pro .....

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ility 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. Th .....

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himself in. However, when such provision makes no distinction between a willful defaulter and the rest, we must view its reasonableness in the background of an ordinary assessee who would be hit and targeted by such a provision. As held by the Supreme Court in the case of Eicher Motors Ltd. (supra) an assessee would be entitled to take credit of input already used by the manufacturer in the final product. In the said case, the Supreme Court was dealing with Rule 57F which was introduced in the C .....

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led to take the credit of the input instantaneously once the input is received in the factory of the manufacturer of the final product and the final product which had been cleared from the factory was sought to be lapsed. The 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 fini .....

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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 required in the interests of the public. Legislation which arbitrarily or .....

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the Constitution. It was observed: Now under Art. 19(2) to (6), restrictions on fundamental "53. 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 imposing restriction or whether the A .....

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sub-rule (3A) of Rule 8 to the extent it requires a defaulter irrespective of its extent, nature and reason for the default to pay the excise duty without availing Cenvat credit to his account can be stated to be a reasonable restriction. It leads to a situation so harsh and a position so unenviable that it would be virtually impossible for an assessee who is trapped in the whirlpool to get out of his financial difficulties. This is quite apart from being wholly reasonable, being irrational and .....

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eriod 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 amounts 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 CENV .....

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uty 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. That it is evident that Honourable Gujarat High Court have held the portion of the Rule "without utilising the Cenvat credit" of sub Rule 3 (A) of Rule 8 of Central Excise Rules, 2002 as .....

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