2010 (1) TMI 1018 - AT - Central Excise

Liability of interest - CENVAT Credit wrongly availed - Held that - the credit availed by the assessee was always in balance and was not used for paying duty till the date of its reversal - the wrongly taken credit was fully reversed before issue of SCN - demand of interest is unjustified - appeal dismissed - decided against Revenue.

Summary

Issues:
1. Incorrect availment of Cenvat credit on capital goods.
2. Reversal of excess Cenvat credit.
3. Demand for interest under Section 11AB.
4. Interpretation of Rule 14 of Cenvat Credit Rules, 2004.

Analysis:
1. The case involved the incorrect availment of Cenvat credit on capital goods, where the respondents availed 100% credit instead of the required 50%. The excess credit was reversed after being pointed out by the Range Officer. The Adjudicating Authority confirmed the demand, reversed amount, and imposed a penalty. The Commissioner (Appeals) upheld the decision, stating that interest was not demanded as the credit was never utilized for paying duty. The Revenue appealed, arguing that interest should be charged as per Rule 14 of Cenvat Credit Rules, 2004.

2. The Tribunal noted that the Revenue did not dispute that the credit was not utilized for duty payment and remained in balance until reversal. The Commissioner's findings were based on factual evidence, and no contrary evidence was presented by the Revenue. Therefore, the Tribunal agreed with the Commissioner's decision, stating that the findings were legally sound and free from flaws. As a result, the appeal by the Revenue was rejected.

3. The Revenue's appeal was based on the interpretation of Rule 14 of Cenvat Credit Rules, 2004. The Revenue argued that interest should be charged regardless of whether the credit was utilized wrongly or taken wrongly. However, the Tribunal found that in this case, where the credit was not utilized for duty payment, the Adjudicating Authority's decision to not demand interest was justified. The Tribunal upheld the Commissioner's decision, emphasizing that the absence of contrary evidence supported the conclusion that interest was not warranted in this scenario.

Conclusion:
The Tribunal upheld the Commissioner (Appeals) decision, rejecting the Revenue's appeal regarding the demand for interest under Section 11AB and the interpretation of Rule 14 of Cenvat Credit Rules, 2004. The case highlighted the importance of factual evidence in determining the appropriate application of rules regarding Cenvat credit availment and reversal, emphasizing that interest may not be demanded if the credit remains unutilized for duty payment.