Rule 8(3A) of Central Excise Rules 2002 is Ultravires: CESTAT Orders Fresh Adjudication [Read Order]

The Ahmedabad Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), ordered fresh adjudication and observed that Rule 8(3A) of the Central Excise Rules 2002 is ultravires.

The appellant, Baroda Rayon Corporation Limited, herein defaulted in making fortnightly payment hence the facility of paying duty fortnightly under the provisions of Rule 173G(1) was withdrawn from the Appellant vide the Assistant Commissioner, Central Excise and they were directed to discharge the duty liability consignment wise through Profit Loss Account (PLA), without utilizing Cenvat Credit.

However on scrutiny of the ER-1 return it was noticed by the department that appellant during the disputed period had started paying duty consignment wise from Cenvat credit account and account current (both the accounts instead of account current only) and hence has not paid duty in terms of Rule 8 of Central Excise Rules, 2002 and all those clearances made by the appellant from the Cenvat account shall be deemed to have been cleared without payment of duty.

Willingdon Christian, Counsel for the appellant submitted that Rule 8(3A) of the Central Excise Rules 2002 [erstwhile Rule 173(G)(1)(e) / 8(3)] has been declared ultra vires in the Judgment of the Gujarat High Court in case of Indsur Global Limited vs. UOI, and therefore, utilization of Cenvat Credit cannot be considered an irregularity. That being so, there does not remain any question of recovery of short payment.

The Counsel further submitted that the entire exercise is revenue neutral, inasmuch as even if everything goes against the Appellant and the Appellant company is required to pay the differential duty through cash, the entire amount of duty already paid by utilizing Cenvat credit will become refundable in cash.

A Two-Member Bench of the Authority comprising Ramesh Nair, Judicial Member and CL Mahar, Technical Member observed that “After hearing both the sides and on perusal of the records, we find that impugned orders were passed by the Adjudicating authority. Whereas the Gujarat High Court decision in the matter of Indsur Global Limited vs. Union of India. Therefore, the matter is remanded to the adjudicating authority to decide the case afresh in view of the Gujarat High Court’s decision in the case of Indsur Global Limited (supra) after giving an opportunity of personal hearing to the appellant.”

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