2010 (8) TMI 722 - AT - Central Excise

Status of dismissed appeal / SLP by the Apex Court - held that - Dismissal of the SLP would not amount to confirmation of the decision of the Tribunal. - The law in that regard is well settled by the Apex Court in Kunhayammed v. State of Kerala (2000 -TMI - 40239 - SUPREME Court). Interest on wrong availment of cenvat credit - reversal of unutilized cenvat credit - held that - In the matter in hand undisputedly the credit was wrongly availed and it was reversed on being pointed out by the Audit. Being so taking into consideration the provisions of Rule 14 of the said Rules merely because it remained unutilised till the last date of financial year in which it was wrongly availed would not be a ground to contend that the appellants are not liable to pay interest.

Summary

Issues:
1. Liability to pay interest on wrongly availed Cenvat credit.
2. Interpretation of Rule 14 of the Cenvat Credit Rules, 2004.
3. Comparison between Rule 14 and Rule 57-I of Central Excise Rules, 1944.
4. Applicability of judicial precedents in determining liability for interest on delayed reversal of Cenvat credit.
5. Impact of unutilized credit on the obligation to pay interest.

Analysis:

1. Liability to pay interest on wrongly availed Cenvat credit:
The appellants were directed to pay interest for wrongly availing Cenvat credit during specific periods. The Department contended that interest was due on the delayed reversal of the credit. The appellants argued against the interest payment, citing unutilized credit by specific dates. The Tribunal upheld the liability to pay interest under Rule 14 of the Cenvat Credit Rules, emphasizing the absence of distinction between wrongly availed and utilized credit when determining interest obligations.

2. Interpretation of Rule 14 of the Cenvat Credit Rules, 2004:
Rule 14 mandates the recovery of wrongly taken or utilized Cenvat credit along with interest. The Tribunal clarified that the rule does not differentiate between wrongly availed and utilized credit concerning interest liability during reversal. This interpretation guided the decision to uphold the interest payment requirement in the present case.

3. Comparison between Rule 14 and Rule 57-I of Central Excise Rules, 1944:
Rule 57-I of the Central Excise Rules, 1944, linked interest payment to wrongful availment due to specific fraudulent activities. In contrast, Rule 14 of the Cenvat Credit Rules does not necessitate proving fraudulent intent for interest recovery. The Tribunal highlighted this distinction to justify the interest imposition based on the specific rule applicable in the case.

4. Applicability of judicial precedents in determining interest liability:
The Tribunal considered the decisions of the Punjab & Haryana High Court and the Tribunal in related cases. While acknowledging these precedents, the Tribunal emphasized the need to apply the relevant rule correctly. The dismissal of Special Leave Petition (SLP) was not deemed as confirmation of the Tribunal's decision, as clarified by established legal principles.

5. Impact of unutilized credit on interest obligation:
The appellants argued that unutilized credit by specific dates should exempt them from paying interest. However, the Tribunal rejected this argument, emphasizing that under Rule 14, the mere unutilization of credit until a particular date does not absolve the appellants from the obligation to pay interest on wrongly availed credit. The decision in a related case was distinguished based on specific factual circumstances.

In conclusion, the Tribunal dismissed the appeals, upholding the liability of the appellants to pay interest on the wrongly availed Cenvat credit as per Rule 14 of the Cenvat Credit Rules, 2004. The judgment clarified the interpretation of relevant rules and highlighted the significance of distinguishing between different provisions to determine interest obligations accurately.