Gujarat High Court, in the case of Advance Surfactants India Ltd. v. Union of India, has held the proviso to sub-rule (4) of Rule 3 of Cenvat Credit Rules to be ultra vires to the scheme of Cenvat Credit inasmuch as it restricted the utilisation of credit to the extent such credit was available on the last day of the month or quarter, for payment of duty relating to that month or the quarter, as the case may be.
The Court observed that on one hand manufacturer was allowed as per Rule 8(1) of the Central Excise Rules, 2002 to pay the duties on the goods removed from the factory during the month by the 6th day of the following month, while on the other hand, though the manufacturer may have Cenvat credit in his account the same cannot be permitted to be utilized after the end of the month.
The proviso to sub-rule 3(4) of Cenvat Credit Rules was hence held to be contrary and /or in conflict with Rule 8(1) of the Central Excise Rules, 2002. The proviso was however not found to be beyond powers conferred under Section 37 of the Central Excise Act, 1944.