2012 (9) TMI 141 - AT - Central Excise

Waiver of pre-deposit - demand of interest - on the ground that the appellant has availed Cenvat credit on the inputs which were used in production of exempted as well as dutiable products Held that - Interest cannot be claimed from the date of wrong availment of CENVAT credit - interest shall be payable from the date CENVAT credit is wrongly utilized

Summary

Issues: Stay petition for waiver of pre-deposit of interest and penalty amounts. Interpretation of Cenvat credit rules and liability for interest.

Stay Petition for Waiver of Pre-Deposit:
The appellant filed a stay petition seeking waiver of pre-deposit of interest and penalty amounts. The Tribunal heard both sides and decided to dispose of the appeal since the issue was narrow. The appellant had availed Cenvat credit on inputs used in exempted and dutiable products, leading to a demand for interest. The appellant had reversed the amount attributable to the credit used in exempted products, which had not been utilized. The Adjudicating Authority's findings, upheld by the Commissioner (Appeals), were considered, along with the judgment of the Hon'ble High Court. The appellant argued that interest should not be payable as the credit was not utilized wrongly.

Liability for Interest on Cenvat Credit:
The Department contended that interest was due as the Cenvat credit had been wrongly taken but reversed before utilization. Reference was made to Board Circular 3-9-2009, asserting that interest was required to be paid as per lower authorities' decisions. The Tribunal referred to the judgment of the Hon'ble High Court of P & H in a similar case, which interpreted the provisions of Rules regarding interest on Cenvat credit. The Court held that interest should only be payable if the credit was taken and utilized wrongly, not simply for the wrong availment. Following this interpretation, the Tribunal set aside the impugned order and allowed the appeal filed by the assessee, disposing of the stay petition as well.

This judgment clarifies the interpretation of Cenvat credit rules and the liability for interest in cases where credit has been availed but not utilized wrongly. The decision provides guidance on when interest becomes payable on Cenvat credit and emphasizes the importance of proper utilization to determine liability.