Custom, Excise & Service Tax Tribunal
Narmada Offshore & Technical Services ... vs Commissioner Of Central Excise, ... on 27 January, 2016
IN THE CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH AT MUMBAI
Appeal No.
E/2018/10
- Mum
(Arising out Order-in-Appeal No. PKS/267/BEL/2010 dated 23.08.2010 passed by the Commissioner of Central Excise (Appeals), Mumbai II)
For approval and signature:
Honble Mr. S.S. Garg, Member (Judicial)
1. Whether Press Reporters may be allowed to see No
the Order for publication as per Rule 27 of the
CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the No CESTAT (Procedure) Rules, 1982 for publication
in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy Yes
of the Order?
4. Whether Order is to be circulated to the Departmental Yes
authorities?
Narmada Offshore & Technical Services P. Ltd.
Appellant
Vs.
Commissioner of Central Excise, Belapur
Respondent
Appearance:
Shri J.C. Patel, Advocate for the appellant Shri S.V. Nair, AC(AR) for the respondent CORAM:
Honble Mr. S.S. Garg, Member (Judicial) Date of hearing : 07.01.2016 Date of decision : 27.01.2016 O R D E R No:..
This appeal is directed against Order-in-Appeal No. PKS/267/BEL/2010 dated 23.08.2010 wherein the Commissioner (Appeals) has upheld the Order-in-Original.
2. Briefly the facts of the case are that the appellants are engaged in the manufacture of excisable goods falling under Chapter 87 of the First schedule to the Central Excise Tariff Act, 1985 and they manufactured all types of tippers, tip-trailers, garbage compactors, flat bed trailers. The allegation against the appellant is that there was a delay on his part in paying Central Excise duty for the month of May 2008. Out of the total of `23,81,272/- payable for May 2008, only `19,83,437/- was paid in time and remaining amount of `3,97,835/- was paid after the due date of 05.06.2008. The same was paid on 27.10.2008 along with interest of `21,680/- by the appellant. Since the payment of the duty of `3,97,835/- was delayed beyond 30 days from due date of 05.06.2008, its the departments case that for the period 06.06.2008 up to 27.10.2008 the appellant was required to discharge the duty from current account (cash) and not through Cenvat account in view of the provisions of Rule 8 (3A) of CENVAT Credit Rules, 2002. The said rules 8 (3A) provides that where there is a default in the payment of duty beyond 30 days from the due date, the manufacturer shall not utilise Cenvat Credit and shall pay duty from the account current during the period commencing from 30 days after the due date till default is rectified by payment of outstanding amount with interest. As the appellant has committed the default in the payment of duty on due dates a show-cause notice dated 20.05.2009 was issued to the appellant alleging that the payment of part of the duty through Cenvat account during 06.06.2008 to 27.10.2008 was in contravention of Rule 8(3A). The appellant filed the reply to the show-cause notice denying the allegations and the Adjudicating Authority vide Order-in-Original dated 16.01.2009, confirming the demand for duty for the said period 06.06.2008 to 27.10.2008 in cash and imposed penalty of `32,97839/- equal to the duty under Rule 25 of Central Excise Act, 2002. Aggrieved by the Order-in-Original the appellant filed the appeal before the Commissioner (Appeals) who vide Order-in-Appeal dated 18.08.2010 upheld the Order-in-Original and rejected the appeal.
3. The ld. Counsel for the appellant submitted that the delay in payment of the said duty occurred on account of the financial crunch faced by the appellant since payments from customers were delayed on account of global recession which occurred in 2008. He further submitted that on account of financial difficulties the appellant could not pay the entire duty in cash for the period 06.06.2008 up to 27.10.2008 and the appellant paid duty of `7,42,590/- in cash and `25,55,249/- through Cenvat.
4. Ld. Counsel for the appellant submitted that the order of the Commissioner (Appeals) is contrary to the law, justice, equity and is liable to be set aside. He further submitted that the provisions of Rule 8(3A) of the Central Excise Rules, 2002 which require payment of duty only through account current and prohibits payment of duty through Cenvat account have been struck down as unconstitutional by the Hon'ble High Court of Gujarat, Madras and Punjab & Haryana by the following judgments:
a) Indsur Global Ltd. -2014 (310) ELT 833 (Guj)
b) Shreeji Surface Coatings P. Ltd. 2015 (320) ELT 764
c) Malladi Drugs & Pharmaceuticals P. Ltd. 2015 (323) ELT 489 (Mad)
d) A.R. Metallurgicals P. Ltd. 2015 (322) ELT 49 (Mad)
e) Sandley Inds. 2015 (326) ELT 256 (P&H)
5. He further submitted that the said rule 3A under which duty is sought to be demanded itself has been struck down as unconstitutional by various High Courts as cited supra. In this situation, the show-cause notice, Order-in-Original and Order-in-Appeal which are based upon rule 8(3A) cannot survive and are liable to be set aside as held by the Hon'ble Gujarat High Court in para 4 of the judgment in Shreeji Surface Coatings P. Ltd. (supra). In para 4, the Hon'ble High Court of Gujarat has observed as under:-
4. When the entire showcause notice, order in original and appellate order are based on Sub-rule (3A) of Rule 8, the portion of which came to be struck down, such orders cannot survive. We have narrated facts only to demonstrate that the facts of the present case squarely fall within the portion of the Rule which was declared as ultra vires by the Court. It was only because the petitioner paid interest of barely about Rs.12,000/through Cenvat Credit instead of paying it in cash, their all subsequent clearances were stigmatized. This was solely relying on the portion of Sub-rule (3A) of Rule 8, which required that the future clearances of a defaulter must be without utilization of the Cenvat Credit.
6. Ld. Counsel for the appellant further submitted that in view of the law down by various High Courts, imposition of penalty under Rule 25 of Central Excise Act, 2002 is totally unsustainable in law. He further submitted that the Tribunal in the following decisions has laid down that for the contravention of said rule 8 no penalty can be imposed under Rule 25 and only a penalty of `5000/- can be imposed under Rule 27. He cited the following authorities on this point:-
* Saurashtra Cement Ltd. 2008 (225) ELT 395 * Praveen Foundry P. Ltd. 2009 (247) ELT 320 * Creative Transformers P. Ltd. 2009 (248) ELT 855 * Tejpal Paper Mills Ltd. 2010 (259) ELT 79.
7. He further submitted that since now the Rule 8(3A) itself has been struck down by various High Courts, no penalty at all can be imposed. Ld. Counsel for the appellant submitted that by relying on the judgment of the Gujarat High Court, this Tribunal in the case of Vaibhav Forge vide Order no. A/1461/15/SMB dated 15.05.2015 has allowed the appeal of the appellant by setting aside the order of appeal passed by the Commissioner.
8. On the other hand, ld. AR reiterates the findings of the lower authorities.
9. It is a fact that the show-cause notice, Order-in-Original and Order-in-Appeal are based on the violation of Rule 8(3A) of the Central Excise Rules, 2002 which require the payment of duty only through account current in case of violation of payment of duty in time as prescribed in Rule 8. As submitted by the ld. Counsel for the appellant that this Rule 8(3A) has been struck down by Hon'ble High Court of Gujarat, Madras and Punjab & Haryana in various judgments cited above, no duty and penalty can be imposed as observed in the case of Shreeji Surface Coatings P. Ltd. (supra) by the Hon'ble High Court of Guajarati. Since the rule under which the entire proceedings have been initiated have been declared unconstitutional, no liability arises under the said Rules. Therefore, keeping in view the law laid down by the Hon'ble High Court of Gujarat, Madras and Punjab & Haryana, I set aside the impugned order by allowing the appeal of the appellant with consequential relief, if any.
(Pronounced in Court on .) (S.S. Garg) Member (Judicial) //SR 7 e-2018-10