Salem Textiles Limited Vs Superintendent of Central Excise (Madras High Court)
The Madras High Court has delivered a significant ruling, declaring Rule 8(4) of the Central Excise Rules, 2001 and 2002, as inconsistent with the Cenvat Credit Rules and ultra vires the Central Excise Act, 1944. This decision, issued in a common order across four writ petitions, including those filed by Salem Textiles Limited, has led to the quashing of related demand and recovery orders, with directions for fresh hearings on the remaining aspects of the demands.
The core of the challenge centered on the legality of Rule 8(4), which petitioners argued was inconsistent with Rules 3 and 4 of the Cenvat Credit Rules, 2001. Furthermore, it was contended that Rule 8(4) exceeded the powers granted by various sections of the Central Excise Act, 1944, and was arbitrary, thus violating Article 14 of the Constitution of India, which guarantees equality before the law.
Judicial Precedent: The Malladi Drugs Case
A pivotal aspect of the High Court’s decision was its reliance on a prior ruling by its own Division Bench. Both the petitioners’ and respondents’ counsel acknowledged that the Madras High Court had previously addressed a similar challenge in the case of M/s. Malladi Drugs & Pharmaceuticals Limited V. The Union of India, The Commissioner of Central Excise (2015 (323) E.L.T 489 (Mad.)).
