2010 (8) TMI 403 - AT - Central Excise

CENVAT credit - 100% EOUs - assessee has taken inadvertently excess credit and on their own detected later on and reversed the excess taken credit. Held that - Merely by taking a wrong credit inadvertently, the assessee has not availed any monetary benefit - In an analogous situation if the assessee-manufacturer maintains a PLA account, the balance available in the said account does not earn interest for them - The CENVAT credit taken or utilised should be read as CENVAT credit taken and utilised for the purpose of demand of interest - The appeal is allowed with consequential relief as per law

Summary

Issues:
- Appeal against Commissioner (Appeals) order setting aside original authority's decision on CENVAT credit recovery of interest.

Analysis:
1. Background: The appeal challenges the Commissioner (Appeals) decision setting aside the original authority's order in favor of the assessee regarding the recovery of interest on excess CENVAT credit taken and later reversed by the appellants.

2. Factual Overview: The appellants, manufacturers of textile machinery and parts, availed CENVAT credit on inputs and capital goods for manufacturing excisable products, with substantial exports and supplies to 100% EOUs. They inadvertently took excess credit on five occasions, detected the error, and voluntarily reversed the excess credit.

3. Legal Arguments: The authorized representative argued that due to significant exports and supplies to 100% EOUs, the appellants had substantial accumulated credit. The excess credit was taken due to clerical errors, promptly detected and rectified by the appellants, without benefiting from it. Citing relevant case laws, the representative contended that the Commissioner (Appeals) decision was incorrect.

4. Rule Interpretation: The issue revolved around Rule 14 of the CENVAT Credit Rules, 2004, which mandates the recovery of wrongly taken or erroneously refunded CENVAT credit along with interest. The rule clarifies that interest is recoverable when credit is "taken or utilized wrongly." The Board's circular further emphasized this point.

5. Judicial Analysis: The judgment analyzed the rule's language, emphasizing that the credit taken by the appellants did not result in any monetary benefit as it was not utilized. It compared the situation to maintaining a PLA account, where the balance does not earn interest. The judgment concluded that no interest is payable when the credit is taken due to a clerical mistake, especially when the assessee has sufficient credit balance and self-detects the error.

6. Decision: After considering both parties' submissions, the judgment set aside the Commissioner (Appeals) decision and reinstated the original authority's order, ruling that no interest is payable on the excess CENVAT credit inadvertently taken and reversed by the appellants.

7. Outcome: The appeal was allowed with consequential relief as per the law, providing a favorable decision for the appellants based on the interpretation of the CENVAT Credit Rules and the specific circumstances of the case.