2016 (6) TMI 1157 - AT - Central Excise

CENVAT credit - the credit has been taken as a mere book entry by the appellant but the said unintended error resulting in taking excess/ineligible credit was duly corrected, immediately by reversing the said credit much before the issuance of show-cause notice and without the same being utilized in any manner whatsoever - is demand of credit with interest and penalty justified? - Held that - the case of the appellants is squarely covered by the decision of Jurisdictional Bench of the Honble High Court of Karnataka in the case of CCE Vs Bill Forge Pvt Ltd 2011 (4) TMI 969 - KARNATAKA HIGH COURT , where it was held that once the entry was reversed, it is as if that the Cenvat credit was not available - demand set aside - appeal allowed - decided in favor of assessee.

Summary

Issues:
1. Irregular availment of CENVAT credit.
2. Demand of interest and penalty.
3. Applicability of legal principles and case laws.

Analysis:
1. The case involved the appellant, engaged in manufacturing woolen/blended fabrics, who availed CENVAT credit on various inputs. An audit revealed unintended errors resulting in excess credit availed during 2008-09, which was promptly reversed. Subsequently, a show-cause notice alleged irregular CENVAT credit availment, demanding interest and penalty. The Commissioner (Appeals) confirmed the demand, leading to the present appeal.

2. The appellant argued that the error was corrected before the notice, citing legal precedents where interest was not levied under similar circumstances. The appellant relied on the decision in the case of CCE Vs Bill Forge Pvt Ltd, distinguishing it from the Commissioner's reliance on other judgments and circulars. The appellant emphasized the applicability of Karnataka High Court's decisions and a larger bench ruling in a specific case, asserting that interest cannot be demanded for reversed, unutilized credit. Conversely, the Revenue contended that irregular credit itself warrants penalty, citing relevant provisions and circulars.

3. Upon review, the Judicial Member found the case aligned with the Jurisdictional Bench of the Karnataka High Court's decision in CCE Vs Bill Forge Pvt Ltd and the principles established in a larger bench ruling involving JK Tyre Industries Ltd. Relying on these binding precedents, the impugned order was set aside, allowing the appeal with any consequential relief. The decision was based on the specific legal interpretations and applicability of established case laws, emphasizing the importance of jurisdictional precedents in determining the outcome of the case.