2013 (8) TMI 768 - AT - Central Excise

Liability to Pay Interest - Excess Credit - Reversal of Credit - Whether the assesse was liable to pay interest in terms of Rule 14 of the CENVAT Credit Rules, 2004 - Held that - Relying upon UOI vs. Ind-Swift Laboratories Ltd. 2011 (2) TMI 6 - Supreme Court - The respondent was liable to pay interest on the amount of CENVAT credit for the period from the date of its irregular availment to the date of its reversal - the period being covered by Rule 14 pre-amendment - A statutory provision is generally read down in order to save the said provision from being declared unconstitutional or illegal - Rule 14 specifically provides that where CENVAT credit has been taken or utilized wrongly or has been erroneously refunded, the same along with interest would be recovered from the manufacturer or the provider of the output service - Decided in favor of Revenue. Whether the respondent was entitled to take CENVAT credit on certain invoices issued by a registered depot of the manufacturer of inputs - Held that - The assesse took CENVAT credit of the duty indicated in the depot invoices - the availment of the CENVAT credit by the assesse cannot be questioned - The case of the revenue was that there was no evidence of the amounts of duty shown in the depot invoices having been paid by the manufacturer If the department had doubts regarding the amounts of duty paid by the manufacturer, appropriate proceedings should have been taken at their end - Any short-payment of duty by the manufacturer could have been taken care of through such proceedings - CENVAT credit was taken on valid documents and the inputs in respect of which such credit was taken were duly used in, or in relation to, the manufacture of final products - Therefore there was no reason to deny the credit to the assesse Decided against Revenue.

Summary

Issues:
1. Liability to pay interest under Rule 14 of the CENVAT Credit Rules, 2004 on excess credit taken and reversed.
2. Interpretation of Rule 14 post-amendment regarding interest liability.
3. Applicability of retrospective effect of Rule 14 amendment.
4. Entitlement to take CENVAT credit on invoices from a registered depot.

Issue 1: Liability to pay interest under Rule 14 on excess credit taken and reversed
The appeal raised the question of whether the respondent is liable to pay interest under Rule 14 of the CENVAT Credit Rules, 2004 on excess credit taken and reversed. The lower appellate authority relied on a High Court judgment which was later reversed by the Supreme Court. The Tribunal analyzed the provisions of Rule 14 as it stood during the relevant period and referred to the Supreme Court's decision in the case of Ind-Swift Laboratories. The Supreme Court clarified that interest is payable on wrongly taken or utilized credit, rejecting the interpretation of the High Court. Consequently, the Tribunal set aside the previous order and held that the respondent is liable to pay interest on the excess credit taken during the specified period.

Issue 2: Interpretation of Rule 14 post-amendment regarding interest liability
The respondent argued that Rule 14 was amended to create interest liability only for wrongly taken and utilized credit, not for credit wrongly taken but unused. They contended that the amendment should have retrospective effect. However, the Tribunal rejected this argument, emphasizing that the amendment does not impact cases before its implementation. The Tribunal upheld the Supreme Court's interpretation of Rule 14, emphasizing that interest is applicable from the date of irregular availment to the date of reversal, as per the pre-amendment Rule.

Issue 3: Applicability of retrospective effect of Rule 14 amendment
The Tribunal addressed the retrospective effect of the Rule 14 amendment, concluding that it does not apply to cases before its enactment. The Tribunal emphasized that the amendment's impact is limited to cases falling post-amendment, and the interpretation of Rule 14 for the relevant period should align with the Supreme Court's decision in the Ind-Swift Laboratories case.

Issue 4: Entitlement to take CENVAT credit on invoices from a registered depot
In another appeal, the question was whether the respondent was entitled to take CENVAT credit on invoices from a registered depot of the manufacturer of inputs. The Tribunal found that the depot was registered for issuing cenvatable invoices, and the inputs were used in manufacturing final products. Despite the appellant's argument regarding duty payment evidence, the Tribunal upheld the respondent's right to claim CENVAT credit based on valid documents and proper use of inputs. Consequently, the appeal was dismissed, affirming the respondent's entitlement to the credit.

In conclusion, the Tribunal's judgments clarified the liability for interest under Rule 14, interpreted the rule post-amendment, addressed the retrospective effect of the amendment, and affirmed the entitlement to CENVAT credit based on valid documentation and proper usage of inputs.