The Delhi Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has directed the excise department to refund the interest and held that the Cenvat Credit can be utilised for payment of duty in case of delayed duty.
The bench of Binu Tamta (Judicial Member) has observed that Cenvat Credit cannot be utilised for payment of duty in case of delayed duty was pending before the Supreme Court. Now that the Revenue has withdrawn the appeal itself, the judgement of the High Court of Gujarat, declaring the provisions of Rule 8(3A) as ultra virus governs the present case.
As per the Rule 3A if the assessee defaults in payment of duty beyond thirty days from the due date, as prescribed in sub-rule (1), then notwithstanding anything contained in said sub-rule (1) and sub-rule (4) of rule 3 of CENVAT Credit Rules, 2004, the assessee shall, pay excise duty for each consignment at the time of removal, without utilizing the CENVAT credit till the date the assessee pays the outstanding amount including interest thereon; and in the event of any failure, it shall be deemed that such goods have been cleared without payment of duty and the consequences and penalties as provided in these rules shall follow.
The appellant/assessee is engaged in the manufacture of ERW Steel Tubes falling under Chapter Heading 7306 9011. It was observed that they had defaulted in payment of Central Excise duty for the month from May 2012 to February 2013 and as a result, duty was payable for the default period and out of total amount of Rs. 1,08,70,234/- the appellant paid Rs. 20,60,000/- in cash and Rs. 88,10,234/- from Cenvat Credit account.
The department objected in terms of the provisions of Rule 8(3A) as utilisation of credit was not permissible for delayed payment of duty and therefore the said clearances were considered as made without payment of appropriate duty. The appellant thereafter paid the entire duty in cash along with interest amounting to Rs.37,47,573/- for the delay under the provisions of Rule 8(3A) of the Rules.
In the writ petition filed before the Gujarat High Court, challenge was made to the constitutionality of Rule 8(3A) of the Rules in so far as it prohibits an assessee from utilising Cenvat credit for payment of excise duty.
The Division Bench in the judgement titled as M/s Indsur Global Vs. UOI declared the condition contained in sub rule 3A of Rule 8 for payment of duty without utilizing the credit till an assessee pays that outstanding amount including interest as unconstitutional. The portion “without utilising in the Cenvat Credit“ of sub rule 3A of Rule 8 was declared invalid by the Court.
In view of the law laid down by the High Court, the appellant filed a refund claim of interest amounting to Rs. 37,47,577/- on 30.11.2015, under Section 11B of the Central Excise Act, 19444, on the ground that interest was not required to be paid by them as utilisation of credit was proper at the relevant time, and there was no delay in payment warranting any interest liability. Both the adjudicating authority and the appellate authority rejected the refund claim on the ground that the decision of the Gujarat High Court has been challenged by the Revenue and the Supreme Court has stayed the operation of the said judgement pending consideration.
The appellant contended that the order dated 29.07.2024 passed by the Supreme Court whereby the Revenue had withdrawn the appeal on account of low monetary effects. Therefore, the findings arrived at by the High Court of Gujarat have attained finality.
The tribunal held that amount paid by the appellant by utilising the Cenvat credit was proper and therefore, no interest was payable thereon. Hence, the appellant is entitled to the refund of the amount paid by them by way of interest on the delayed payment of duty with 12% interest per annum from the date of the final order of the Supreme Court till the date of payment.
Case Details
Case Title: M/s Aman Pipes (P) Ltd. Versus Commissioner, Central Excise & Service Tax, Jaipur
Case No.: Excise Appeal No. 52037 of 2018 – SM
Date: 22/01/2025
Counsel For Appellant: Madhu Sudan Sharma
Counsel For Respondent: Rohit Issar