TMI Blog2023 (5) TMI 237X X X X Extracts X X X X X X X X Extracts X X X X ..... ed:- 2-5-2023 - MR. RAMESH NAIR, MEMBER (JUDICIAL) AND MR. C.L. MAHAR, MEMBER (TECHNICAL) Shri Shailesh P. Sheth, Advocate for the Appellant Shri Tara Prakash, Deputy Commissioner (AR) for the Respondent ORDER The issue involved in the present case is that whether the appellant is liable to pay excise duty from PLA as against the duty paid from accumulated Cenvat credit when the appellant have defaulted the monthly payment of duty beyond prescribed time limit, in terms of Rule 8(3A) of Central Excise Rules, 2002. 2. Shri Shailesh P. Sheth, learned Counsel appearing on behalf of the appellant at the outset submits that entire case was made out invoking Rule 8(3A) of Central Excise Rules, 2002 however the said rule was held ultra-vires in the case of Indsur Global Limited vs. UOI 2014 (310) ELT 833 (Guj.). Following the said judgment there are many other judgments were passed which are relied upon as under:- (a) Precision Fasteners Limited vs. CCE - 2015 (316) ELT 595 (Guj.) (b) A.R. Metallurgicals P. Limited vs. CESTAT, Chennai - 2015 (322) ELT 49 (Mad.) (c) Malladi Drugs Pharmaceuticals Limited vs. UOI - 2015 (323) ELT 489 (Mad.) (d) Frontie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egislation. In the case of St. Johns Teachers Training Institute v. Regional Director, National Council for Teacher Education - (2003) 3 SCC 321, it was observed that it is also well settled that in considering the vires of subordinate legislation one should start with the presumption 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 the case of State 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... must be confined to the grounds on which plenary legislation may be questioned, to the ground that it is contrary to the statute under which it is made, to the ground that it is contrary to other statutory provisions or that it is so arbitrary that it could not be said to be in conformity with the statute or 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 dischar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , clause (ib) of sub-section (2) of Section 37 authorizes the Government to frame rules to provide for the assessment and collection of duties of excise, the authorities by whom functions under the Act would be discharged, the issue of notices requiring payment, the manner in which 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sub-rule (3A) come in two folds. Firstly, a defaulter assessee has to clear the consignments on spot payment of excise duty and secondly, 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 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 availab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess, competition in the market reducing the profit margins, promised payments from the purchasers not coming forth or temporary labour disputes, would find it extremely difficult thereafter to raise further funds for payment of duty 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 suffered 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of. 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 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 stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be achieved, the same must be held to be wholly arbitrary and unreasonable. We may recall, the delegated legislature in its wisdom now dismantled this entire mechanism and instead has provided for penalty at the rate of 1% per month on delayed payment of duty. 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. 37 . In the present case, the further prayer of the petitioner is for setting aside the order, dated 27-2-2009 passed by the adjudicating authority. This prayer, however, cannot be granted. It is because of the following reasons. 38 . Against the order of the adjudicating authority, the petitioner had a statutory right of appeal before the Commissioner in terms of Section 35 of the Central Excise Act, 1944. Such appeal had to be filed within sixty days from the date of communication of the order. The Commissioner, had power on being satisfied about ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
