2013 (12) TMI 96 - AT - Service Tax

Availment of CENVAT Credit - Assessee had doubt whether they had utilized the Cenvat credit wrongly in view of provisions under Rule 6(3)(c) of Cenvat Credit Rules, they on their own on 5-5-2005 and 4-8-2005, paid in cash, amount of excess Cenvat credit utilized by them during the period September, 2004 to March, 2005 along with applicable interest - Refund of CENVAT Credit as per Rule 6(3)(c) - Held that - under Rule 6(3)(b)(f), the rule makes a provision that the assessee may take credit on its own for adjusting excess amount of Cenvat credit utilized. This rule is for a slightly different situation but is within the overall situation dealt by Rule 6 which is about adjustment of Cenvat credit when an assessee takes credit of input or input services and utilizes it for providing both taxable services and non-taxable services - The Revenue has not been able to point any argument by which the appellant was not be entitled to the credit it has taken after payment of equivalent amount in cash. Therefore, the entire matter relates to only procedural violation to the extent that the appellant should not have taken the credit on its own but should have applied for a refund. Such procedural violation cannot result in demand of duty equal to the credit which they have taken. This can at best result in a penalty - Decided partly in favour of assessee.

Summary

Issues:
1. Applicability of Rule 6(3)(c) of Cenvat Credit Rules
2. Validity of availing Cenvat credit without restriction
3. Procedural violation in availing Cenvat credit
4. Entitlement to credit after payment of excess Cenvat credit

Analysis:
1. The judgment dealt with the issue of the applicability of Rule 6(3)(c) of the Cenvat Credit Rules. The appellants had availed Cenvat credit on various input services, inputs, and capital goods during a specific period without any restriction on utilization. However, due to doubts regarding the correct utilization of the credit, the appellants voluntarily paid the excess amount utilized and applicable interest. The contention was that by complying with the provisions of Rule 6(3)(c) through cash payment, they should be entitled to take back the equivalent amount of Cenvat credit utilized in the past. The argument was supported by a previous Tribunal decision in a similar context.

2. The second issue revolved around the validity of availing Cenvat credit without any restriction during the period in question. The Revenue argued that there was no provision allowing the assessee to take suo motu credit of an amount previously used for duty payment. In contrast, the appellants relied on a different provision under Rule 6(3)(b)(f) that allowed adjustment of excess Cenvat credit utilized by the assessee. The Tribunal noted that the Revenue failed to provide any valid argument against the appellants' entitlement to the credit after the cash payment.

3. The judgment also addressed the procedural violation in availing Cenvat credit. It was acknowledged that the appellants should have applied for a refund instead of taking the credit on their own. However, the Tribunal emphasized that such a procedural error should not lead to a demand for duty equivalent to the credit taken. The violation was considered minor and more suitable for a penalty rather than a duty demand.

4. Lastly, the issue of entitlement to credit after the payment of excess Cenvat credit was resolved in favor of the appellants. The Tribunal set aside the demand for repayment of Rs. 2,62,68,609/- and interest, approving the credit taken by the appellants. However, the penalty imposed under Rule 14(iii) was upheld, indicating a partial allowance of the appeal by rejecting the demand for Cenvat credit repayment and interest while maintaining the penalty.