2013 (4) TMI 536 - AT - Central Excise

Interest payable on wrong credit taken - Held that - As decided in UOI Vs. Ind-Swift Laboratories Ltd. 2011 (2) TMI 6 - Supreme Court that interest is payable also in cases where credit is wrongly taken but not utilized. This is a case of interest due as per the above said decision of the Apex Court which dues was adjusted from rebate sanctioned. Commissioner (Appeal) has gone beyond the issue for which SCN was issued and has granted refunds without due regard to provisions in section 11B of the Central Excise Act and without filing of any refund claim. Thus the order of the Commissioner (Appeals) is not proper and therefore set aside the same and restore the adjudication order. The appeal filed by Revenue is allowed.

Summary

Issues:
1. Eligibility of Cenvat credit and reversal of credit amount.
2. Adjustment of interest on excess Cenvat credit against rebate claim.
3. Scope of adjudication in response to Show Cause Notice (SCN).
4. Appeal against the order of the Commissioner (Appeals) regarding credit reversal.
5. Dispute over interest payment and rebate sanction.

Issue 1: Eligibility of Cenvat credit and reversal of credit amount
The respondent, a manufacturer availing Cenvat credit, faced discrepancies in credit claimed during April 07 and July 07. The Superintendent highlighted the issue, leading to the respondent voluntarily reversing an amount of Rs.6,34,497/- on 31.1.2009. A subsequent demand for additional reversal and interest was contested by the respondent, claiming the reversal was correct and interest unnecessary due to unutilized credit balance.

Issue 2: Adjustment of interest on excess Cenvat credit against rebate claim
The appellant filed a rebate claim for exports made in Nov 10, proposing an adjustment of Rs.1,24,571/- towards interest on previously reversed Cenvat credit. The respondent contested the adjustment, arguing that the original reversal was incorrect, and only a portion needed to be reversed along with interest from the rebate.

Issue 3: Scope of adjudication in response to Show Cause Notice (SCN)
The adjudicating authority held that the respondent's voluntary reversal of wrongly taken Cenvat credit required interest payment as per provisions. The authority ordered the deduction of Rs.1,24,571/- from the rebate amount, leading to an appeal by the appellants against this decision.

Issue 4: Appeal against the order of the Commissioner (Appeals) regarding credit reversal
The Commissioner (Appeals) ruled in favor of the respondents, allowing them to take back a portion of the reversed credit and only requiring a smaller amount to be reversed with interest. The Revenue appealed this decision, arguing that the Commissioner exceeded the scope of the issue in the SCN and Order-in-Original.

Issue 5: Dispute over interest payment and rebate sanction
The Revenue contended that the Commissioner's decision was beyond the original issue raised and that any grievance regarding the credit reversal should have been addressed separately. The respondent argued that the reversal was not voluntary and questioned the demand for interest without a specific SCN. The judge ultimately sided with the Revenue, citing a Supreme Court decision on interest payable for wrongly taken credit and setting aside the Commissioner's order, reinstating the adjudication order.