M/S. Fairdeal Supplies Limited vs Commissioner Of Central Excise & S.T., ...

(Arising out of OIO-38/COMMR/2012 dated 23.08.2012, Passed by Commissioner Central Excise, & S.T., Rajkot)

M/s. Fairdeal Supplies Limited : Appellant (s)

VERSUS

Commissioner of Central Excise & S.T., Rajkot : Respondent (s)

Represented by :

For Appellant (s) : Shri J.N. Bhagat, Consultant For Respondent (s) : Shri Lalatendu Patra, Authorised Representative

For approval and signature :

Mr. H.K. Thakur, Honble Member (Technical)

1 Whether Press Reporter may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

No 2 Whether it should be released under Rule 27 of CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

No 3 Whether their Lordships wish to see the fair copy of the Order?

Seen 4 Whether Order is to be circulated to the Departmental authorities?

Yes

CORAM :

Mr. H.K. Thakur, Honble Member (Technical)

Date of Hearing / Decision : 10.06.2015

ORDER No. A/10786 / 2015 Dated 10.06.2015

Per : Mr. H.K. Thakur;

This appeal has been filed by the appellant with respect to penalty of Rs. 25 Lakhs imposed by the adjudicating authority under Rule 25(1) of Central Excise Rules, 2002.

2. Shri J.N. Bhagat, (Consultant) appearing on behalf of the appellant argued that the issue involved is regarding default in payments of duty as per Rule 8 (3A) of the Central Excise Rules, 2002, for the period 05.6.2011 to 12.12.2011. That the entire amount of Rs. 83,33,543/- alongwith interest of Rs. 4,71,098/- has been paid by the appellant through challans. It was the case of the appellant that at the time of clearance of the goods, the duty was being paid through CENVAT credit account and the goods cannot be said to have been cleared without payment of duty and no penalty was attracted as per the provisions of Rule 25(1) of the Central Excise Rules, 2002. He relied upon the case law of Hon'ble Gujarat High Court in the case of Indsur Global Limited vs. UOI  [2014 (310) ELT 833 (Guj.)]. It was strongly argued by the learned Consultant that the High Court in this case has held that the provisions of Rule 8 (3A) of the Central Excise Rules, 2002 ultra-vires to the extent the duty can not be paid through CENVAT credit. It was the case of the appellant that once the entire default amount has been paid and the Hon'ble Gujarat High Court has held certain provisions of Rule 8 (3A) as ultra-vires, therefore, no penalty is attracted in their case.

3. Shri Lalatendu Patra (AR) appearing on behalf of the Revenue defended the order passed by the lower authority and argued that non payment of duty in cash at the time of clearance, will amount to clandestine removal and penalty has been correctly imposed under Rule 25 (1) of the Central Excise Rules, 2002.

4. Heard both sides and perused the case records. This appeal is pertaining to imposition of penalty of Rs. 25 Lakh upon the appellant under Rule 25() of the Central Excise Rules, 2002. It is observed from Para 9 (v) of the Order-in-Original dated 31.08.2012 that entire defaulted amount alongwith interest was paid by the appellant before issue of show cause notice. During the period of default, the duty was being paid by the appellant through CENVAT account. The Hon'ble High Court in the case of Indsur Global Limited vs. UOI (supra) has held in Para 35 and 36 as follows:-

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 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 borders 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 CENVAT credit which is nothing but the duty on various inputs already paid by him would be a restriction so harsh and out of proportion to the aim sought to 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. From the above settled proposition of law, once the provisions of Rule 8(3A) with respect to portion without utilisation the CENVAT credit, has been rendered invalid, it cannot be held that penalty is required to be imposed in this case when duty was paid from CENVAT credit account. Accordingly, appeal filed by the appellant with respect to imposition of penalty is required to be allowed.

5. Appeal filed by the appellant is allowed by setting aside the penalty imposed by the adjudicating authority.

(Order dictated and pronounced in the Court)

(H.K. Thakur) Member (Technical) .KL

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