M/S. Vikrant Auto Industries vs Cce-Delhi-I

[Arising out of order-in-appeal no. DLI-EXCUS-001/COM/09/2014 dated 19/3/2014 passed by CCE-Delhi-i]

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

2. Whether it would be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

3. Whether their Lordships wish to see the fair copy of the order?

4. Whether order is to be circulated to the Department Authorities?

M/s. Vikrant Auto Industries Appellant

Vs.

CCE-Delhi-I Respondent

Appearance: Shri Vipul Aggarwal, Advocate for the appellant

Shri M.S. Negi, DR for the respondent.

Coram: Honble Shri Rakesh Kumar, Member (Technical)

Honble Shri S.K. Mohanty, Member(Judicial)

Final Order No. 51987/2015

Per: Rakesh Kumar

In this case, the appellants duty liability for the month of April, 2012 was Rs. 10,10,590/- which was to be paid by 5th March, 2012. However, the appellant paid the duty of Rs. 7,10,590/- through CENVAT Credit account and one lakh through PLA and as such there was short payment of Rs. 2 lakh. It is not in dispute that at that time, the CENVAT Credit balance was about 3,27,000/- and according to the appellant, the failure to discharge the full duty liability was due to clerical mistake.

2. It is also not in dispute that appellant realized from mistake and paid the balance amount of duty on 19/12/2012 along with interest. This delay in discharge of full duty liability for April, 2012 was noticed by the Audit sometime in July, 2013. In terms of Rule 8 (3A) of Central Excise Rules, 2002 when there is delay in discharge of duty liability for particular month beyond the period of one month from the due date, the provisions of Sub Rule 3 (A) of Rule 8 become applicable and accordingly, forfeiture period starts, i.e., the assessee is required to pay the duty consignment wise instead of paying on monthly basis and that too without utilizing the CENVAT Credit. Since this forfeiture period had started from 6/6/2012 which continued till 18/12/2012 and since during this period, the appellant had paid certain duty by utilizing the CENVAT Credit, a show cause notice was issued to the appellant for payment of that duty through PLA along with interest, and also for imposition of penalty on them as according to the provision of Rule 8 (3A) clearance of goods during the forfeiture period by payment of duty through CENVAT Credit account is deemed to be as the clearances made without payment of duty and all the consequences of the Central Excise Rules, 2002 in this regard would follow. The matter was adjudicated by the Commissioner vide order-in-original dated 19/3/2014 by which the Commissioner confirmed the duty demand of Rs. 60,35,409/- against the appellant along with interest on it under section 11AA and directed them to pay this amount through PLA. Besides this, he imposed penalty of Rs. 2 lakh under Rule 25 of the Central Excise Rules. While imposing lower penalty, the Commissioner in para 19.2 of the order observed that he has taken into consideration the appellants plea that in April, 2012 they had sufficient balance in the CENVAT Credit account to discharge the pending duty liability of Rs. 2 lakh for that month, but the same was not done due to clerical mistake and as such there was no intention of the appellant to evade the payment of the duty.

3. Against this order of the Commissioner, this appeal has been filed.

4. Heard both the sides.

5. Shri Vipul Aggarwal, Advocate, ld. Counsel for the appellant pleaded that the issue involved in this case stands decided in the appellants favour by the judgment of Honble Gujarat High Court in the case of Indsur Global Limited Vs. Union of India reported in 2014 (310) ELT 833 Guj by which the Honble High Court has gone into the question of constitutionality of Sub-Rule 3 (A) of the Rule 8 of the Central Excise Rules, 2002 according to which during the period of delay in discharge of the monthly duty liability for a particular month which is beyond the period of one month from the due date, the assessee is required to pay the duty consignmentwise and without utilizing the CENVAT Credit and has held that this provision requiring the payment of duty without utilizing the CENVAT Credit during the forfeiture period is unconstitutional; that though Honble Madras High Court in the case of Unirols Airtex Vs. Assistant Commr. Of Central Excise- Coimbatore reported in 2013 (296) 449 MAD has held that during the forfeiture period, the duty is required to be paid consignmentwise and without utilizing the CENVAT Credit, in view of the provision of Rule 8 (3a), but the Madras High Court in that case has not gone into the question of constitutionality of the provisions of Rule 8 (3A); and that when the provisions of Rule 8 (3A) requiring payment of duty without utilizing the CENVAT Credit during forfeiture period have been held to be unconstitutional, the impugned order of the Commissioner which is based on the provisions of Rule 8 (3A) would not be sustainable. He, therefore, pleaded that impugned order is not correct.

6. Shri M.S. Negi, learned DR defended the impugned order by citing the judgments of Honble Madras High Court in the cases of Unirols Airtex Vs. Assistant Commr. Of Central Excise-Coimbatore (Supra), Commr. of C. Ex. Chinnai-III Vs. A.R. Metallurgical Pvt. Ltd. 2014 (306) ELT 418 (Mad.) and also a judgment of Honble Karnatka High Court in the case of Manjunatha Industries Vs. Commr. Of C. Excise (Appeals-I), Bangalore reported in 2014 (308) ELT (Kar.) wherein it has been held that in view of the provisions of Rule 8 (3A) during the period of delay in discharge of duty liability for a particular month beyond the period of one month from the due date, duty in respect of the clearances made is required to be paid through PLA, without utilizing the CENVAT Credit. He, therefore, pleaded that there is no infirmity in the impugned order.

7. We have considered the submissions from both the sides and perused the records.

8. The only point of disputes in this case is as to whether during the period from 6/6/2012 to 18/12/2012, i.e., period of delay in discharge of duty liability for April, 2012 which is beyond the period of one month from the due date, the appellant were liable to pay the duty in respect of the goods cleared during this month only through PLA without utilizing the CENVAT Credit and whether penalty under Rule 25 of the Central Excise Rules, 2002 would be attracted. Both the sides agree that Honble Gujarat High Court in the case of Indsur Global Limited Vs. Union of India (Supra) has gone into the constitutional validity of the provisions of sub rule 3 (A) of Rule 8 of the Central Excise Rules and has specifically held that requirement of this sub-rule to pay duty without utilizing CENVAT Credit during the period of delay in discharge of duty liability for a particular month, which is beyond the period of one month from the due date, is unconstitutional; and though Honble Madras High Court in the case of Unirols Airetx Vs. Assistant Commr. Of C. Ex. Coimbatore (Supra) and Commr. Of C. Ex., Chennai-III Vs. A.R. Metallurgicals Pvt Limited (supra) and Honble Karnatka High Court in the case of Manjunatha Industries Vs. Commissioner of C. Ex. (Appeals-I), Bangalore (Supra) have, taking into the account the provisions of Rule 8 (3A) held that during the period of delay in discharge of monthly duty liability for a particular month beyond the period of one month from due date, the provisions of Rule 8 (3A) become applicable and the duty on the goods cleared during this period is required to be paid without utilizing the CENVAT Credit, the High Courts have not gone into the question of constitutionality of this provision. However, recently same view as that in case of Indsur Global Limited (supra) has been expressed by Honble Madras High Court in case of M/s. Malladi Drugs & Pharmaceuticals Ltd. Vs. Union of India reported in 2015 TIOL-1262-HC-MAD-CX. When sub-rule 3 (A) of Rule 8 of the Central Excise Rules, 2002 has been struck down as unconstitutional by two High Courts, in our view, Commissioners order based on the Rule 8 (3A) would not survive. Hence, the impugned order is set aside. The appeal is allowed with consequential relief, if any.

(Rakesh Kumar)

Member (Technical)

(S.K. Mohanty)

Member (Judicial)

Ritu