INDSUR GLOBAL LTD. Vs. UNION OF INDIA

JUDGEMENT

(1.) In this petition, the petitioner has challenged the constitutionality of rule 8(3A) of the Central Excise Rules 2002 insofar as the said rule prohibits an assessee from utilising cenvat credit for payment of excise duty. The petitioner has also prayed for quashing the order dated 27.2.2009 passed by the adjudicating authority confirming the demand of central excise duty of Rs.42,86,273/- with interest and also imposing penalty. Brief facts are as under:

(2.) The petitioner is a company registered under the Companies Act. The petitioner is engaged in the manufacturing of spheroidal graphite which we are informed is in the nature of iron castings. As per rule 8(3) of the Central Central Excise Rules 2002, the petitioner was required to pay excise duty on clearance of the goods on monthly basis. For the months of August 2007 to November 2007, the petitioner did not pay such duty by the last date permitted under the said rule. Under such circumstances, by virtue of rule 8(3A) of the Central Excise Rules, 2002, the petitioner was required to clear the future consignments upon actual payment of duty without utilizing cenvat credit till the outstanding duty with interest was fully cleared. We are informed that this inability of the petitioner to pay full duty by the due date continued for some time thereafter also, however, the unpaid duty was only part of the total duty liability of the petitioner for the period under consideration on each occasion. We are further informed that the petitioner cleared all its due with interest by December 2008. It was, however, clarified that during this period, the petitioner did utilize the cenvat credit for payment of excise duty.

(3.) For the defaults in the payment of duty by the due date and utilization of cenvat credit for payment of duty thereafter, though prohibited under rule 8(3A) of the Central Excise Rules 2002, the competent authority of the Central Excise Department issued show cause notices to the petitioner for the above mentioned period. These show cause notices culminated into the order dated 27.2.2009 passed by the Additional Commissioner of Central Excise, Vadodara. He held that the assessee had defaulted in payment of central excise duty on the goods cleared and had not made the payments in the manner prescribed under rule 8(1) read with rule 8(3A) of the Central Excise Rules, 2002. He held that the duty paid by the petitioner from the cenvat credit was not in terms of rule 8(3A) of the Central Excise Rules 2002. The petitioner's defence of precarious financial condition was not accepted. It was under such circumstances that the adjudicating authority confirmed the duty demand with interest and penalty. For the remaining periods of defaults, further show cause notices were issued. Proceedings arising out of such show cause notices are pending at different stages.