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2008 (1) TMI 806 - AT - Central Excise
Issues:
1. Denial of credit on welding electrodes. 2. Recovery of interest under Section 11AB of the Central Excise Act, 1944. Issue 1: Denial of credit on welding electrodes The appellant filed an appeal against the denial of credit on welding electrodes used for repair and maintenance, along with the imposition of a penalty and recovery of interest. The Adjudicating Authority disallowed the credit and imposed a penalty, which was later set aside by the Commissioner (Appeals). The appellant argued that they had taken the credit but not utilized it, citing relevant case laws. The Tribunal upheld the denial of credit on welding electrodes based on previous decisions, including one by the Hon'ble Rajasthan High Court and another by the Tribunal itself. The denial of credit was deemed justified. Issue 2: Recovery of interest under Section 11AB The appellant contested the recovery of interest under Rule 12 of the Cenvat Credit Rules 2001/02, arguing that interest should not be levied as they had not utilized the credit. The Departmental Representative argued that recovery of interest was warranted under Rule 12, emphasizing that interest is applicable even if the credit was taken wrongly but not utilized. The Tribunal examined relevant case laws, including those under the erstwhile Central Excise Rules 1944, to determine the applicability of interest. The Tribunal concluded that recovery of interest is compensatory in nature and is triggered by the withholding of tax payment. Since the appellant had not utilized the credit and had not benefited from it, the recovery of interest was set aside. The Tribunal clarified that the expression "taken" under Rule 12 covers situations where the assessee benefits from taking credit, and in this case, as the credit was not utilized, the payment of interest was deemed unsustainable. In conclusion, the denial of credit on welding electrodes was upheld, while the recovery of interest under Section 11AB was set aside. The Tribunal modified the order of the Commissioner (Appeals) accordingly, emphasizing that interest is recoverable when the assessee benefits from taking credit, which was not the case here.
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