2014 (11) TMI 1139 - AT - Central Excise

Utilization of CENVAT credit - interest on unutilized credit - Held that - exchequer not being prejudiced in absence of finding that there was no sufficient credit on record while set off of duty liability was made against CENVAT credit account by appellant, appeal succeeds - appeal allowed.

Summary

Issues:
- Accumulation of CENVAT credit
- Distinction between credit availed and credit utilized
- Applicability of interest and penalty

Accumulation of CENVAT credit:
The case involved M/s. BHEL accumulating credit of nearly Rs. 1 crore, duly recording CENVAT credit in statutory records and periodically reviewing it. The appellant explained that any excess credit taken was immediately reverted without utilization. The issue arose when certain entries of CENVAT credit appeared inadvertently in the records without any utilization, leading to a demand for interest. The appellant argued that in such cases where no utilization occurred, interest should not be levied unreasonably. The tribunal considered the appellant's explanation and found no prejudice to the exchequer due to the unutilized credit, ultimately allowing the appeal.

Distinction between credit availed and credit utilized:
The appellant's counsel highlighted the distinction between credit availed and credit utilized, citing a judgment by the Hon'ble Supreme Court in the case of CCE, Mumbai-I Vs. Bombay Dyeing & Mfg. Co. Ltd. The counsel pointed out that another judgment in the case of U.O.I. Vs. Ind Swift Lab was delivered without considering the earlier judgment. Additionally, the government had amended the law to exempt interest on unutilized credit. Given these circumstances, the tribunal acknowledged the difficulties faced and ruled that in such situations, no interest or penalty should be levied, considering the fitness of the case.

Applicability of interest and penalty:
The revenue opposed the appellant's contentions, supporting the initial adjudication. However, the tribunal noted that the appellant's case involved unutilization of credit, and since there was no finding that there was insufficient credit on record when duty liability was set off against the CENVAT credit account, the exchequer was not prejudiced. Consequently, the tribunal allowed the appeal, ruling in favor of the appellant and deciding that there should be no levy of interest or penalty in the given circumstances.