2009 (3) TMI 662 - AT - Central Excise

Interest on Cenvat credit - Held that - merely because credit has been taken, if the credit is found to be wrongly taken subsequently, if the same has not been used, interest is not payable - appeal dismissed - decided against Revenue.

Summary

Issues:
- Appeal against the impugned order allowing appeal filed by respondents on ground of wrong Cenvat credit not utilized and reversal of credit sufficing without interest demandable.
- Interpretation of Rule regarding differentiation between taking credit and utilizing it, and whether interest is payable once credit is taken.

Analysis:
The judgment deals with an appeal by the Revenue against an order allowing the respondents' appeal on the basis that the wrongly availed Cenvat credit had been reversed and not utilized, hence interest was not demandable. The Revenue contended that once the credit is taken, interest is payable, irrespective of utilization. The Tribunal observed that the appellants had reversed the wrongly availed Cenvat credit after it was pointed out by the department. The appellants maintained a credit balance of over Rs. 7,01,682 throughout the period of wrong availment till reversal. The Adjudicating Authority erred in considering only one account balance instead of the total balance available during the disputed period. The respondents cited precedents to support their argument that if wrongly taken credit remains unused, interest is not payable, which the Tribunal found valid.

The Tribunal analyzed the decisions in Kyungshin Industrial Motherson Ltd. v. C.C.E Chennai and C.C.E Delhi v. Maruti Udyog Ltd., which supported the view that interest is not payable if wrongly taken credit remains unutilized. The Tribunal concluded that if the credit is found to be wrongly taken but not used, interest is not payable. Therefore, the appeal filed by the Revenue was deemed to lack merit and was rejected. The judgment emphasizes the distinction between taking credit and utilizing it, stating that interest liability arises only when wrongly taken credit is actually utilized, not merely taken. The Tribunal's decision clarifies the interpretation of the Rule in question and sets a precedent based on established legal principles and prior judgments.