2011 (5) TMI 601 - AT - Central Excise

Non reversal of Cenvat Credit - Cenvated capital goods transferred by the appellant from one unit to another unit - Held that - Show cause notice did not mention the confirmation of Cenvat Credit demand as appropriation of the amount already paid. Since Cenvat Credit had already been reversed and the show cause notice did not propose to recover the same, there was no necessity to confirm the Cenvat Credit demand & penalty would not be attracted. Assessee would be liable to pay only the interest under Rule 13 of Cenvat Credit Rule, 2002 r.w.s. 11AB which is attracted in every case of wrong availment of Cenvat Credit as decided in UOI and Ors. Versus Ind-Swift Laboratories Ltd. (2011 (2) TMI 6 - SUPREME COURT) - partly in favour of assessee.

Summary

Issues:
1. Confirmation of Cenvat Credit demand without mention in show cause notice.
2. Imposition of interest and penalty on reversed Cenvat Credit amount.
3. Appeal against Commissioner (Appeals) order setting aside demand.

Analysis:
1. The case involved a dispute regarding the confirmation of Cenvat Credit demand without specific mention in the show cause notice. The respondent had transferred Cenvat capital goods to another unit without reversing the appropriate amount of Cenvat Credit. The Assistant Commissioner confirmed the Cenvat Credit demand and imposed interest and penalty. However, the Commissioner (Appeals) set aside the demand, citing lack of mention in the show cause notice. The Tribunal agreed with the Commissioner (Appeals) that since the Cenvat Credit had already been reversed and not proposed for recovery in the notice, confirming the demand was unnecessary. Therefore, the Commissioner (Appeals) decision on this issue was upheld.

2. The appellant argued that interest and penalty were justified despite the reversed Cenvat Credit payment. The Departmental Representative contended that interest under Section 11AB and penalty under Rule 13 of Cenvat Credit Rules were warranted. However, the Tribunal disagreed, citing a Supreme Court judgment that interest is attracted in cases of wrong availment of Cenvat Credit, but penalty may not be applicable in certain circumstances. The Tribunal upheld the Commissioner (Appeals) decision to set aside the interest and penalty, except for the interest portion, which was restored based on the original adjudicating authority's order.

3. The appellant further challenged the Commissioner (Appeals) order setting aside the demand, leading to an appeal by the revenue and a cross-objection by the respondent. The Tribunal concluded that since the Cenvat Credit had been reversed before the show cause notice and was not proposed for recovery, confirming the demand was unnecessary. Therefore, the Tribunal disposed of the Revenue's appeal by upholding most of the Commissioner (Appeals) order, except for setting aside the interest, which was restored based on the original adjudicating authority's decision.