Aditya Auto Products & Engineering India Pvt. Ltd. Vs Commissioner of GST & Central Excise (CESTAT Chennai)
Summary: The CESTAT Chennai Bench, in Aditya Auto Products & Engineering India Pvt. Ltd. Vs Commissioner of GST & Central Excise, examined whether a central excise duty demand raised under Rule 8(3A) of the Central Excise Rules, 2002 could be sustained when the provision had been declared unconstitutional by the High Courts. The appellant manufactured motor vehicle parts falling under CETSH 87089900. During scrutiny of ER-1 returns for November 2014 to September 2015, the Department noticed that the appellant had declared central excise duty payable on clearances but discharged the amounts after delays exceeding one month by utilising CENVAT credit earned during subsequent months. The appellant had also paid interest of ₹3,76,296 under Rule 8(3) and penalties of ₹69,676 under Rule 8(3A). The Department considered the payments through subsequently accrued CENVAT credit improper and proposed recovery of duty in cash, together with interest and penalty. A show cause notice dated 7 December 2015 was issued, and the adjudicating authority confirmed the proposals through Order-in-Original No. 48/2016 dated 28 June 2016.
Before the Tribunal, the central question was whether the excise duty demand based on Rule 8(3A) was legally sustainable. The Tribunal noted that the Gujarat High Court, in Indsur Global Ltd. Vs Union of India, 2014 (310) E.L.T. 833 (Guj.), had declared Rule 8(3A) unconstitutional. The same position had been followed by the jurisdictional Madras High Court in Malladi Drugs & Pharmaceuticals Ltd. Vs Union of India, 2015 (323) E.L.T. 489 (Mad.), and A.R. Metallurgicals P. Ltd., 2015 (322) E.L.T. 49 (Mad.). The Tribunal further referred to its earlier decisions in DRD Body Tech’s (India) Pvt. Ltd. Vs Commissioner of Customs, Excise & Service Tax, Hyderabad, 2020 (374) E.L.T. 270 (Tri.-Hyd.), and Praweg Conveyors Vs Commissioner of Customs, Excise, Kalyan-III, 2016 (337) E.L.T. 450 (Tri.-Bom.), which had followed the High Court rulings.
Applying the principle of judicial discipline, the Tribunal held that the demand raised under Rule 8(3A) could not survive in view of the binding judicial decisions concerning the provision’s constitutional validity. It therefore set aside the adjudication order and allowed the appeal with consequential benefits, if any, in accordance with law. The decision confirms that an excise demand founded on the impugned operation of Rule 8(3A) cannot be sustained in the circumstances covered by the cited High Court judgments.
Cases Discussed
- Indsur Global Ltd. Vs Union of India (Gujarat High Court); 2014 (310) E.L.T. 833 (Guj.): Relied upon for the ruling declaring Rule 8(3A) of the Central Excise Rules, 2002 unconstitutional.
- Malladi Drugs & Pharmaceuticals Ltd. Vs Union of India (Madras High Court); 2015 (323) E.L.T. 489 (Mad.): Followed the Gujarat High Court’s ruling concerning Rule 8(3A).
- A.R. Metallurgicals P. Ltd. (Madras High Court); 2015 (322) E.L.T. 49 (Mad.): Cited as another jurisdictional High Court decision following the position on Rule 8(3A).
- DRD Body Tech’s (India) Pvt. Ltd. Vs Commissioner of Customs, Excise & Service Tax, Hyderabad (CESTAT Hyderabad); 2020 (374) E.L.T. 270 (Tri.-Hyd.): Cited as a Tribunal decision applying the High Court rulings.
- Praweg Conveyors Vs Commissioner of Customs, Excise, Kalyan-III (CESTAT Mumbai); 2016 (337) E.L.T. 450 (Tri.-Bom.): Cited as a Tribunal decision following the judicial position concerning Rule 8(3A).
FULL TEXT OF THE ORIGINAL ORDER OF CESTAT CHENNAI
The present Appeal is filed by M/s. Aditya Auto Products & Engineering India Pvt. Ltd, aggrieved by the Order-in-Original No.48/2016 (CE) dated 28.06.2016 passed by Commissioner of Central Excise, Chennai.
2. The Appellant is engaged in the manufacture and clearance of excisable goods, viz., motor vehicle parts, falling under CETSH No.87089900. On scrutiny of ER-1 Returns filed by the Appellant-Assessee for the month of November 2014 to September 2015, it was noticed that the Assessee had declared an amount as „Central Excise Duty payable‟, under the column „duty payable for clearance‟, but had been paying the declared amount, after a period of more than a month, by utilizing the CENVAT credit. The Cenvat credit so utilized had been earned by them, during the subsequent period, i.e. duties of excise payable for a given month was paid with interest, in the subsequent months, by utilizing the CENVAT credit accrued in the later months. It is the case of the Revenue that the Appellant have paid penalties (to the tune of Rs.69,676/-) under Rule 8(3A) of Central Excise Rules, 2002 and interest (to the tune of Rs.3,76,296/-) under Rule 8(3) of Central Excise Rules upto the period they have discharged the duties through CENVAT credit and hence these payments appear to be incorrect. The same should be calculated and demanded in cash after the Assessees pay the Excise Duty in cash. Hence, Show Cause Notice No. 54/2015-CE dated 07.12.2015 was issued to the Appellant proposing to demand Excise Duty under Rule 8(3A) of Central Excise Rules, 2002 along with interest and to impose penalty. After due process, Adjudicating Authority vide impugned Order-in-Original No.48/2016 dated 28.06.2016 confirmed the proposals made in Show Cause Notice. Aggrieved by the order of Adjudicating Authority the present Appeal is filed by the Appellant before this forum.
3. Heard Shri M.V. Sridhar, Ld. Consultant for the Appellant and Shri M. Selvakumar, Ld. Assistant commissioner for the Revenue-Respondent.
4. After hearing both sides and on perusal of records, we find that the issue that arises for our consideration in the present Appeal is, “whether demand of Central Excise Duty Raised under the provisions of Rule 8(3A) of Central Excise Act is sustainable or not?”
5. We find that the provisions of Rule 8 (3A) have been held ultra vires as unconstitutional by the Hon‟ble Gujarat High Court in Indsur Global Ltd. v. Union of India – 2014 (310) ELT 833 (Guj.) which has been followed by the Jurisdictional Hon‟ble High Court of Madras in Malladi Drugs & Pharmaceuticals Ltd. vs. Union of India – 2015 (323) ELT 489 (Mad) and A.R. Metallurgicals P. Ltd. – 2015 (322) ELT 49 (Mad.). The judgement (supra) has been followed by the Tribunal in the following decisions:
(i) DRD Body Tech’s (India) Pvt. Ltd. vs. Commissioner of Customs, Excise & Service Tax, Hyderabad – 2020 (374) ELT 270 (Tri.-Hyd)
(ii) Praweg Conveyors vs. Commissioner of Customs, Excise, Kalyan-III, 2016 (337) ELT 450 (Tri.-Bom).
Following the judicial discipline, the demand in the impugned order cannot sustain and accordingly the impugned order is set aside. Appeal is allowed with consequential benefits, if any, as per law.
(Order pronounced in open court on 28.11.2025)
