[Judgment per : S. Ravindra Bhat, J. (Oral)]. - In all these appeals the assessee had defaulted and had not paid the excise duty within the stipulated period. It sought to utilise the Cenvat credit due to it towards payment of duty. Restrictions were imposed by Rule 8(3A) of the Central Excise Rules, 2002 in this regard. The adjudicating authority applied Rule 8(3A) and proceeded to impose penalty as well. The Commissioner on appeal in some of these cases merely reduced the penalty having regard to the mandatory nature of Rule 8(3A). In these circumstances, the assessee’s appeal was sent back.

2. By the time the CESTAT took up these appeals, the Gujarat High Court had rendered a judgment in Indsur Global Ltd. v. Union Of India)]. The CESTAT noticed the said decision and granted relief, holding the claims of Cenvat credit to be admissible. Consequentially, it also set aside the direction of penalty. Operative portion of the order in CEAC 5/2016 reads as under :

“7. I have gone through the case law relied upon by the learned AR before me. In all of them, the constitutional value of Rule 8 (3A) of Central Excise Rules, 2002 was not the issue before the Hon’ble High Court. Moreover, all these decisions have been passed by Hon’ble High Court prior to the decision of Indsur Global Ltd. (supra). As Hon’ble High Court of Gujarat has held provisions of Rule 8(3A) of Central Excise Rules, 2004 to be unconstitutional on 27-11-2014 and decisions of this Tribunal cited by learned AR have been passed by the Tribunal prior to Indsur Global Ltd. (supra). In these circumstances, the only decision available before me wherein the constitutional validity of Rule 8(3A) of Central Excise Rules, 2002 has been decided by Hon'ble High Court is Indus Global (supra). To maintain judicial discipline, I am bound to follow the decision of Gujarat High Court in the case of Indsur Global Ltd. (supra). Therefore, I hold that as Rule 8(3A) of Central Excise Rules, 2002 has been declared unconstitutional, consequently proceedings against the appellant are not sustainable. Further I find that appellant has contravened the provisions of Central Excise Rules, 2002, therefore, general penalty under Rule 27 of Central Excise Rules, 2002 is imposable. Therefore, I impose penalty under Rule 27 of Central Excise Rules, 2002 on the main appellant i.e. M/s. Space Telelink Ltd. of Rs. 5,000/- (Rupees Five thousand only). Further, I hold that the Managing Director has not contravened, penalty on Managing Director are set aside.”

3. Likewise, in other appeals as well, the claims of Cenvat credit was held to be admissible and the penalty imposed was set aside.

4. The revenue urges that this Court is not bound by the decision of the Gujarat High Court. The learned counsel argues that being a fiscal statute, whereby facility of payment of duty is spelt out by the provisions itself, imposition of conditions for availing benefit - as in the case of Cenvat credit, cannot be characterised being restrictive of the freedom of trade. It is highlighted that Cenvat credit itself is a creation of statute and the conditions imposed, therefore, in order to fasten recovery per se is not arbitrary. The learned counsel further submitted that the Gujarat High Court erred in accepting the assessee’s contentions that the restrictions placed upon the use of Cenvat credit in case of default, were oppressive in nature.

5. The Gujarat High Court took note of the revenue’s contention with regard to the justification of Rule 8(3A). It was of the opinion that the restrictions imposed under the Rule were unreasonable to the extent that it only required a default, irrespective of the extent or nature of the default, and consequently, excise duty had to be paid without availing Cenvat credit. The High Court further reasoned “it leads to a situation so harsh and a position so unenviable that it would be virtually impossible for an assessee who is trapped in the whirlpool to get out of his financial difficulties. It is quite apart from being wholly reasonable, being irrational and arbitrary and therefore, violative of Article 14 of the Constitution. It prevents him from availing credit of duty already paid by him. ” The reasoning of the Gujarat High Court in Indsur Global Ltd. v. Union Of India, , quoted above, was upheld by A.R. Metallurgicals P. Ltd. v. Cestat, Chennai.); Sandley Industries v. Union of India (P&H) and ATV Projects India Ltd. v. Union of India, (All.)

6. This Court also notices that the Indsur Global Ltd. {supra) decision had cited and relied upon the decision in Eicher Motors Ltd. v. Union of India (S.C.) as well as upon the decision in Collector v. Dai Ichi Karkaria Ltd. (S.C.) In Dai Ichi (supra), the Court held as follow :

“17. It is clear from these Rules, as we read them, that a manufacturer obtains credit for the excise duty paid on raw material to be used by him in the production of an excisable product immediately it makes the requisite declaration and obtains an acknowledgment thereof It is entitled to use the credit at any time thereafter when making payment of excise duty on the excisable product. There is no provision in the Rules which provides for a reversal of the credit by the excise authorities except where it has been illegally or irregularly taken, in which event it stands cancelled or, if utilised, has to be paid for. We are here really concerned with credit that has been validly taken, and its benefit is available to the manufacturer without any limitation in time or otherwise unless the manufacturer itself chooses not to use the raw material in its excisable product. The credit is, therefore, indefeasible. It should also be noted that there is no co-relation of the raw material and the final product; that is to say, it is not as if credit can be taken only on a final product that is manufactured out of the particular raw material to which the credit is related. The credit may be taken against the excise duty on a final product manufactured on the very day that it becomes available.

18. It is, therefore, that in the case of Eicher Motors Ltd. v. Union of India (1999) 106 E.L.T. 3 : (1999 AIR SCW 563 : AIR 1999 SC 892) this Court said that a credit under the Modvat scheme was "as good as take paid.

7. The revenue has argued that the Supreme Court has entertained a Special Leave Petition against the judgment of the Gujarat and Madras High Courts and furthermore, granted a stay of proceedings and that in these circumstances, the law declared in those judgments are no longer applicable. This submission is fallacious because in Shree Chamundi Mopeds Ltd. v. Church of South India Trust Association (1992) 3 SCC 1, the Supreme Court had observed as follows :

“ While considering the effect of an interim order staying the operation of the order under challenge, a distinction has to be made between quashing of an order and stay of operation of an order. Quashing of an order results in the restoration of the position as it stood on the date of passing of the order which has been quashed. The stay of operation of an order does not, however, lead to such a result. It only means that the order which has been stayed would not be operative from the date of passing of the stay order and it does not mean that the said order has been wiped out from existence. This means that if an order passed by the appellate authority is quashed and the matter is remanded, the result would be that the appeal which had been disposed of by the said order of the appellate authority would be restored and it can be said to be pending before the appellate authority after the quashing of the order of the appellate authority. The same cannot be said with regard to an order staying the operation of the order of the appellate authority because in spite of the said order, the order of the appellate authority continues to exist in law and so long as it exists, it cannot be said that the appeal which has been disposed of by the said order has not been disposed of and is still pending. We are, therefore, of the opinion that the passing of the interim order dated February 21, 1991 by the Delhi High Court staying the operation of the order of the appellate authority dated January 7, 1991 does not have the effect of reviving the appeal which had been dismissed by the appellate authority by its order dated January 7, 1991 and it cannot be said that after February 21, 1991, the said appeal stood revived and was pending before the appellate authority.”

8. It is apparent therefore, that an order keeping in abeyance the judgment of a lower Court or authority does not deface the underlying basis of the judgment itself, i.e. its reasoning.

9. In view of the above discussion, this Court holds that the impugned order and reasoning of the CESTAT does not call for interference and the Court is not persuaded to take a view different from those taken by the Gujarat, Allahabad, Punjab & Haryana and Madras High Courts, respectively. The appeals are consequently dismissed.