2014 (2) TMI 59 - HC - Central Excise

Reversal of CENVAT Credit - date of reversal of credit - on the date of versus at the date of - Assessee removed inputs, on which Cenvat Credit was availed and the credit was not reversed on the date of removal - Interest u/s 11AB - Commissioner (Appeals) held that the duty liability having been paid prior to the issuance of show cause notice, the question of imposing penalty or demanding interest does not arise - Held that - expression on the date of such removal is referable to the rate applicable to such goods and it cannot be understood to mean that the duty should be paid at the time of removal in terms of substituted provisions. The expression on the date of such removal stands deleted in the new Sub Rule (4) to Rule 3 of Cenvat Credit Rules,2002 - assessee has paid the duty at the end of the month, i.e., much prior to the 5th day of the following month or in case where the removal had taken place in March before 31st March of the relevant year. In such circumstances, it cannot be said that the there has been delay in payment of duty so as to invoke Section 11AB of the Central Excise Act,1944. Even though the Tribunal has proceeded on the basis that the deposit was made prior to the issuance of show cause notice - assessee has deposited the amount before the issuance of show cause notice, yet essentially the assessee s case falls within the scope of Rule 3(4) r/w Rule 8 of the Cenvat Credit Rules, 2002 - Decided against Revenue.

Summary

Issues: Interpretation of provisions under Cenvat Credit Rules, 2002 regarding payment of interest on delayed duty payment and reversal of Cenvat credit.

Analysis:

1. Issue 1 - Demand of Interest under Section 11AB of the Central Excise Act, 1944:
The case involved the demand of interest on the assessee for not reversing Cenvat credit on inputs removed during a specific period. The Commissioner (Appeals) held that since the duty liability was paid before the show cause notice, imposing penalty or demanding interest was not justified. The Tribunal dismissed the appeal by the Department, stating that there was no enabling provision in the statute for recovering interest. The appellant challenged this decision, arguing that Section 11AB of the Act, read with Rule 12 of Cenvat Credit Rules, 2002, provided for the recovery of interest under specific conditions. The Court analyzed Rule 3(4) of the Cenvat Credit Rules, 2002, which mandates the payment of duty on inputs removed as such, and concluded that since the duty was paid before the due dates as per Rule 8, the invocation of Section 11AB was not warranted.

2. Issue 2 - Interpretation of Cenvat Credit Rules, 2002:
The Court examined Rule 3(4) of the Cenvat Credit Rules, 2002, which was substituted in 2003, requiring the manufacturer to pay an amount equal to the credit availed on inputs removed as such. The original rule mandated payment of duty at the time of removal, but the substituted rule removed this requirement. Rule 8 of the Cenvat Credit Rules, 2002, specified the timeline for duty payment, and the Court noted that the assessee had paid the duty well before the due dates. The Court emphasized that the duty payment was made in compliance with the rules, and there was no delay that would trigger the application of Section 11AB of the Act.

3. Conclusion:
The Court rejected the Revenue's appeal, emphasizing that the assessee had paid the duty within the prescribed timelines as per the Cenvat Credit Rules, 2002. The Court found that the case fell within the scope of Rule 3(4) read with Rule 8, and therefore, the demand for interest under Section 11AB was unwarranted. The judgment clarified the interpretation of the relevant rules and upheld the decision in favor of the assessee.