2008 (1) TMI 774 - AT - Central Excise

Summary

Issues:
1. Delay in reversal of cenvat credit under Rule 14 of CCR.
2. Applicability of interest demand under Section 11AB of the Central Excise Act.
3. Interpretation of Rule 14 of CCR in the context of credit utilization.

Issue 1: Delay in reversal of cenvat credit under Rule 14 of CCR
The case involved M/s. Rajalakshmi Textile Processors Pvt. Ltd. (RTPPL) seeking waiver of pre-deposit and stay of recovery of interest amounting to Rs. 23,727/- demanded due to a delay of 29 days in reversing cenvat credit. The Assistant Commissioner demanded the interest under Section 11AB of the Act, citing Rule 14 of the Cenvat Credit Rule, 2004 (CCR). RTPPL argued that they validly availed the credit and the delay in reversal did not warrant interest payment as the credit was not utilized. The Tribunal referenced a similar case precedent where interest was not demanded when credit was not utilized wrongly, leading to the decision to set aside the demand.

Issue 2: Applicability of interest demand under Section 11AB of the Central Excise Act
The Assistant Commissioner invoked Section 11AB to demand interest for the delay in reversing cenvat credit. However, the Tribunal noted that Section 11AB can only be applied when credit is taken or utilized wrongly, which was not the case in the present situation. The department failed to establish any wrongful utilization of credit by RTPPL, leading to the conclusion that the interest demand was not sustainable under Section 11AB.

Issue 3: Interpretation of Rule 14 of CCR in the context of credit utilization
Rule 14 of the CCR provides for the recovery of cenvat credit wrongly taken or erroneously refunded, along with interest. The law mandates the reversal of cenvat credit when opting for exemption on goods. In this case, despite a delay in reversing the credit, the balance remained unutilized in RTPPL's account. The Tribunal emphasized that Rule 14 cannot be applied to recover interest when credit was not taken or utilized wrongly, aligning with the precedent set in a similar case. Consequently, the Tribunal set aside the impugned order, allowing RTPPL's appeal and disposing of the stay application.

This judgment clarifies the legal principles surrounding the demand for interest on delayed reversal of cenvat credit, emphasizing the necessity for wrongful utilization to invoke such demands under Section 11AB of the Central Excise Act. The interpretation of Rule 14 of the CCR in the context of credit utilization plays a crucial role in determining the liability for interest payments, ensuring compliance with the statutory provisions governing cenvat credit transactions.