TMI Blog2023 (5) TMI 1078X X X X Extracts X X X X X X X X Extracts X X X X ..... 2013 - FINAL ORDER NO. 85789 - 85791/2023 - Dated:- 31-3-2023 - HON BLE MR. SANJIV SRIVASTAVA, MEMBER (TECHNICAL) And HON BLE DR. SUVENDU KUMAR PATI, MEMBER (JUDICIAL) Shri Amrendra Kumar Jha, Deputy Commissioner , Authorized Representative for the Revenue None, for the Appellant in other than revenue appeal ORDER PER : SANJIV SRIVASTAVA This appeal is directed against order-in-original no. 06/CEX/2013 dated 24.01.2013. By the impugned order held as follows: (i) I hereby confirm the demand of Rs.1,76,55,000/-(Rupees One Crore Seventy Six Lakh Fifty Five thousand only) and order recovery thereof under proviso to Section 11A(1) of CEA, 1944 and under Section 11A(4) CEA, 1944 for the period w.e.f. 08-04-2011. The amount of Rs. 1,76,55,000/- paid by the assessee during investigation is appropriated against above demand. (ii) I order recovery of interest under Section 11AB (Section 11AA w.e.f. 08-04-2011) of CEA, 1944 on the above amount. The interest of Rs. 11,54,875/- paid by the assessee against defaulted amount is appropriated. (iii) Under Section 11AC of CEA, 1944, I impose penalty of Rs.1,76,55,000/- on the assessee. Assessee shoul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of Rule 8 (3A) a Show cause notice dated 12.03.2012 was issued to the assesse and both the director Shri. Abey Kumar Mohanlal Goyal and Shri.Charanjit Paul Jindal asking them to show cause as to why:- i) Central Excise duty of Rs. 1,76,55,000/- not paid by them on the clearances of goods as mentioned in para 4,5 6 of SCN should not be demanded recovered from them under the provisions of Rule 8 of CER, 2002 read with proviso to then Section 11A(1) of CEA, 1944 and now Section 11A(4) of CEA, 1944 w.e.f. 08-04-2011. Further, as to why the amount of Rs. 1,76,55,000/- paid by the said assessee should not appropriated against such demand. ii) Cenvat credit of Rs. 80,99,532/- wrongly utilized by the assessee for the clearances of goods during August-2010 to April-2011 in contravention of the provisions of Rule 8(3A) of CER, 2002 should not be disallowed and the said amount of duty should not be recovered in account current i.e. from PLA account under the provisions of Rule 8(3A) of CER, 2002 read with proviso to then Section 11A(1) of CEA, 1944 and now Section 11A(4) of CEA, 1944 w.e.f 08-04-2011. iii) Interest should not be charged and recovered from them under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 of the said Rules pertains to duty payable on removal. Sub-rule (1) thereof provides that every person who produces or manufactures any excisable goods, or who stores such goods in a warehouse, shall pay the duty leviable on such goods in the manner provided in Rule 8 or under any other law, and no excisable goods, on which any duty is payable, shall be removed without payment of duty from any place where they are produced or manufactured or from a warehouse unless otherwise provided. Rule 5 of the Central Excise Rules, 2002, pertains to date of determination of duty and tariff valuation. Sub-rule (1) thereof provides the rate of duty or tariff value applicable to any excisable goods other than khandsari molasses shall be the rate or value in force on the date when such goods are removed from a factory or a warehouse, as the case may be. As per rule 6, an assessee has to himself assess the duty payable on any excisable goods. As per Rule 7, if an assessee is unable to determine the value of excisable goods or determine the rate of duty applicable, he may request the Assistant Commissioner of Central Excise or the Deputy Commissioner in writing giving reasons for payment of duty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lizing the CENVAT credit till the date the assessee pays the outstanding 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. As per this sub-rule, in case of an assessee who has defaulted in payment of duty beyond thirty days from the due date, has to pay excise duty for each consignment at the time of removal without utilizing the Cenvat credit till he pays the outstanding amount including interest. In the event of failure, it would be deemed that such goods have been cleared without payment of duty and the consequences and penalties as provided in the rules would follow. 20. We may record that sub-rule (3A) which was introduced with effect from 1-6-2006 has since been substituted by notification, dated 11th July 2014 and the current applicable sub-rule (3A) reads as under : (3A) If the assessee fails to pay the duty declared as payable by him in the return within a period of one month from the due date, then the assessee is liable to pay the penalty at the rate of one per cent. on such amount of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aw material or capital goods in the manner provided in the said rules. In this context, sub-rule (3A) of Rule 8 makes two fold departure in case of an assessee who has been unable to pay the duty by the due date and such default continues for a further period of 30 days from the due date. If an assessee who was required to pay the entire months of excise duty by the 5th or 6th of the following month, does not do so for a further period of 30 days, the unpleasant consequences envisaged in sub-rule (3A) would follow. Such consequences would be that he would no longer enjoy the facility of payment of excise duty on monthly basis and he would have to clear each consignment on actual payment of duty and secondly that he would not be entitled to avail of Cenvat credit for such purpose. 27-11-2014 24. We may recall that the petitioner has challenged only that portion of sub-rule (3A) of Rule 8 which requires a defaulter to clear the finished product on payment of excise duty without availing the Cenvat credit. We may consider the petitioner s challenge to the vires of such rule in the background of the statutory scheme. Before doing so, however, we may examine the parameters o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is made. It may further be questioned on the ground that it is contrary to some other statute. That is because subordinate legislation must yield to plenary legislation. It may also be questioned on the ground that it is unreasonable, unreasonable not in the sense of not being reasonable, but in the sense that it is manifestly arbitrary. In England, the Judges would say Parliament never intended authority to make such rules. They are unreasonable and ultra vires . The present position of law bearing on the above point is stated by Diplock L. J. in Mixnam. Properties Ltd. v. Chertsey U. D. C. - (1964) 1 QB 214 thus :- The various grounds upon which subordinate legislation has sometimes been said to be void can, I think, today be properly regarded as being particular applications of the general rule that subordinate legislation, to be valid, must be shown to be within the powers conferred by the statute. Thus the kind of unreasonableness which invalidates a bye-law is not the antonym of reasonableness in the sense of which that expression is used in the common law, but such manifest arbitrariness, injustice or partiality that a court would say : Parliament never in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edit; 27. According to Shri Parikh, when clause (xiiia) of sub-section (2) of Section 37 circumscribes the rule making power in case of evasion of duty, the sub-ordinate legislation cannot fall back on the general provisions of sub-section (1) of Section 37 and therefore, any power to frame sub-rule (3A) of Rule 8 must be seen to have been by necessary implication taken away. This contention, however, for various reasons cannot be accepted. Firstly clause (xiiia) was introduced in the statute with effect from 8-5-2010. Subrule (3A) of Rule 8 was introduced in the year 2006. No guidance, therefore, can be had from clause (xiiia) in the context of discretion of the power of the rule making authority under the delegated legislation. Further, quite apart from sub-section (1) of Section 37 itself giving sufficiently wide powers to the Central Government to frame rules to carry into effect the purposes of the Act, sub-section (2) of Section 37 further clarifies that the purposes enumerated in various clauses under the said sub-section are without prejudice to the generality of the powers flowing from sub-section (1). If, therefore, any rule is framed which would be otherwise withi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f monthly payment and adjustment of Cenvat credit is taken away. The fact that two sets of assessees form different and distinct class identifiable and differentiated by intelligible differentia cannot be disputed. In one class, we have those assessees who complied with the requirements of the rules and made payment of excise duty by the due date and the other class forms of those assessees who missed the due date by at least 30 days. If the Legislature, therefore, treats these two distinct classes differently, this would certainly not a case of hostile discrimination. An assessee who for whatever reasons is unable to pay the duty within the time prescribed by the statute cannot complain of being differently treated from those who fulfill the statutory requirements. The provisions contained in sub-rule (3A) have a purpose to achieve relatable to the class of assessees who failed to pay the duty in time is also equally clear. It is only when the condition of payment of duty by the 5th or the 6th day of month following the previous month of clearance is not fulfilled by an assessee that the stringent requirement of collection of duty on each consignment and withdrawal of the facility ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in any of the following : (a) removal of goods without the cover of an invoice and without payment of duty; (b) removal of goods without declaring the correct value for payment of duty, where a portion of sale price, in excess of invoice price, is received by him or on his behalf but not accounted for in the books of account; (c) 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 well as the notification issued by the Government would apply to special class of assessees who through their conscious act tried to evade duty. 30. It can be seen that the reasons for non-payment of excise duty can be manifold and not necessarily in all cases have to be willful default by an assessee despite availability o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Central Excise Rules, 1944 under which credit lying unutilized in the Modvat credit account of an assessee on 16th March, 1995 would lapse. Such provision was questioned. The Supreme Court held that since excess credit could not have been utilized for payment of the excise duty on any other product, the unutilised credit was getting accumulated. For the utilization of the credit, all vestitive facts or necessary incidents thereto had taken place prior to 16-3-1995. Thus the assessees became entitled 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nality, just as it is done in the case of the main legislation. This, in fact, is being done by our Courts. 34. By no stretch of imagination, the restriction imposed under sub-rule (3A) of Rule 8 to the extend 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 arbitrary and therefore, violative of Article 14 of the Constitution. It prevents him from availing credit of duty already paid by him. It also is a serious affront to his right to carry on his trade or business guaranteed under Article 19(1)(g) of the Constitution. On both the counts, therefore, that portion of sub-rule (3A) of rule must fail. 35. The situation can be looked at slightly different angle. With or without the provisions of sub-rule (3A), liability to pay interest for the default period as per s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bound to follow it as held by this Court in C.C.E., Mumbai-III v. Valson Dyeing Bleaching Printing Works - 2010 (259) E.L.T. 33 (Bom.). In the above case, the Tribunal allowed the appeal of the respondent holding that the basis of the proceeding therein was on account of breach of Notification No. 42 of 1998 (N.T.), dated 10th December, 1998. This notification had been declared ultra vires by the Madras High Court in the case of Beauty Dyers v. Union of India - 2004 (166) E.L.T. 27 (Mad.). This Court after placing reliance upon its earlier decision in the case of C.I.T. v. Godavaridevi Saraf - (1978) 113 ITR 589 = 1978 (2) E.L.T. (J624) (Bom.) which held that the Tribunal was justified in following the judgment of the Madras High Court in the case of Beauty Dyers (supra). Once the provision has been declared ultra vires by any High Court then one has to proceed on the basis that the provision which has been declared as unconstitutional is non-existant. Therefore, unless a contrary decision is given by any other competent Court, the Tribunal in the State has to proceed with the decision of the other High Court as it is the law of land and binding upon it. Nothing has been shown to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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