The Hon’ble Gujarat High Court (HC) in the case of Indsur Global Ltd v Union of India & others (TS-556-HC-2014(GUJ)-EXC), has struck down Rule 8(3A) of the Central Excise Rules, 2002 (Rules), thereby permitting the monthly payment of excise duty and utilisation of CENVAT credit even during the default period (i.e. when an assessee fails to pay the duty within stipulated time).
Under Rule 8 of the said Rules, excise duty is required to be paid, on the goods removed from a factory or warehouse during a month, by the 6th of the following month if the duty is paid electronically through internet banking and by the 5th of the following month in any other case. However, if the assessee defaults in payment of duty for a period of more than one month, Rule 8(3A) required the assessee to pay the duty consignment wise without utilizing the CENVAT credit.
It may be noted that w.e.f. 11 July 2014, the Central Government had removed the said restriction on utilisation of CENVAT credit during default period.
The HC in its order striking down Rule 8(3A) has observed that the condition attached under Rule 8(3A) was unreasonable and violative of Article 14 of the Constitution since it amounted to a serious restriction on the petitioner’s right to carry on trade or business of his choice guaranteed under Article 19(1)(g) of the Constitution.
This order by the HC gives relief to a large number of assessees who have defaulted in excise duty payments in the past and were unable to utilise the CENVAT credit during the default period.