2010 (12) TMI 420 - HC - Central Excise

Appeal u/s 35G - Demand - Cenvat credit - Interest u/s 11AB - In the circumstances, when the assessee was not even required to reverse the credit taken on the inputs contained in the semi-finished goods, the question of paying interest on late reversal of credit taken would not arise - In the circumstances, the assessee having reversed the credit taken by it prior to utilization the same would amount to not taking credit and as such the question of liability to pay any interest thereon would not arise - the appeal is dismissed

Summary

Issues:
1. Interpretation of Section 11AB of the Central Excise Act regarding interest payment on Cenvat Credit availed on destroyed goods.
2. Applicability of Section 11AB of the Act in cases of delayed reversal of wrongly availed Cenvat Credit.
3. Liability for interest on Cenvat Credit not reversed for a long time.

Detailed Analysis:
Issue 1: The case involved a challenge to an order by the Customs, Excise & Service Tax Appellate Tribunal regarding the recovery of Cenvat Credit availed on goods destroyed in a fire accident. The Tribunal held that interest under Section 11AB of the Act was not applicable in this case. The appellant argued that interest should be paid due to delayed payment of duty and reversal of Cenvat Credit. The Tribunal's decision was based on the interpretation of Section 11AB and Rule 12 of the Cenvat Credit Rules, stating that interest is not demandable in the present circumstances.

Issue 2: The appellant contended that Section 11AB should apply to cases where Cenvat Credit was wrongly utilized or refunded, as per Rule 12 of the Rules. The Tribunal, however, held that interest was not payable on certain amounts of Cenvat Credit due to specific circumstances, such as inputs being used in manufacturing processes. The Tribunal's decision was supported by previous Tribunal rulings and the Supreme Court's decision in a similar case.

Issue 3: The Tribunal further analyzed the liability for interest on Cenvat Credit not reversed for a long time. The appellant argued that interest should be paid as per Rule 12 of the Rules. However, the Tribunal found that in cases where credit was not utilized, the liability to pay interest did not arise. The Tribunal's decision was in line with previous Tribunal decisions and the Supreme Court's ruling in a related matter.

Overall, the High Court dismissed the appeal, stating that there was no substantial question of law to warrant interference with the Tribunal's order. The Court disagreed with some of the Tribunal's reasoning but ultimately found no reason to overturn the decision. The judgment provides a detailed analysis of the interpretation and application of relevant provisions of the Central Excise Act and Cenvat Credit Rules in the context of the specific circumstances of the case.