Rule 8(3A) of Central Excise Rules already Declared Unconstitutional by Gujarat HC: CESTAT sets aside ₹14.14cr Demand [Read Order]

The New Delhi Principal Bench of the Customs,Excise and Service Tax Appellate Tribunal (CESTAT), has set aside a central excise duty demand raised under Rule 8(3A) of the Central Excise Rules, 2002, holding that the provision had already been declared unconstitutional and could not form the basis for sustaining any demand.

The appeal arose from an Order-in-Original dated September 1, 2014 passed by the Commissioner of Central Excise, Jaipur, confirming a demand of ₹14.14 crore along with interest and penalty.

The proceedings arose from allegations that the assessee had defaulted in payment of central excise duty for the month of September 2012 and had failed to discharge the liability through cash on a consignment basis after the lapse of thirty days.

A show cause notice dated July 4, 2013 was issued, proposing recovery of duty without permitting utilisation of CENVATcredit in terms of Rule 8(3A) of the Central Excise Rules, 2002. Despite a detailed reply denying the allegations, the adjudicating authority confirmed the demand.

The appeal was heard by a Bench comprising Justice Dilip Gupta (President) and P.V. Subba Rao (Technical Member). During the proceedings, it was also noted that the appellant, M/s Rathi TMT Saria Pvt. Ltd., was undergoing insolvency proceedings and an Interim ResolutionProfessional had been appointed pursuant to an order of the National Company Law Tribunal, New Delhi.

Before the Tribunal, the appellant contended that Rule 8(3A), to the extent of mandated payment of duty without utilisation of CENVAT credit, had been struck down by the Gujarat High Court in Indsur Global Ltd. v. Union of India as arbitrary and violative of Articles 14 and 19(1)(g) of the Constitution.

The Tribunal observed that the decision in Indsur Global had been consistently followed by the Allahabad, Punjab and Haryana, Delhi and Madras High Courts. It also took note of the fact that the civil appeal filed by the department against the Gujarat High Court judgment was dismissed.

The departmental representative conceded that the issue involved was covered by the ruling in Indsur Global. In view of the settled legal position and the declaration of unconstitutionality of Rule 8(3A), the Tribunal held that the demand could not be sustained.

Accordingly, the impugned order dated September 1, 2014 was set aside and the appeal was allowed.

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