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2014 (2) TMI 822 - AT - Central ExciseInterest demand - Reversal of CENVAT Credit under Rule 3(5) of the Cenvat Credit Rules, 2004 - CENVAT Credit taken on such inputs was not reversed at the time of removal of inputs as such, which resulted in short reversal of CENVAT Credit - Recovery of interest under Rule 14 of the Cenvat credit Rules, 2004 read with Circular No. 897/17/2009-CX dated 3.9.2009 - Held that - provision of limitation are applicable to the recovery of interest - where the credit has not been utilized, the same would not attract the interest provisions - Following decision of Hindustan Insecticiedes Ltd. Vs. CCE, Ltu 2013 (8) TMI 225 - DELHI HIGH COURT , CCE & ST, Bangalore Vs. Bill Forge Pvt. Ltd. 2011 (4) TMI 969 - KARNATAKA HIGH COURT whereas said decision was passed after considering the decision of Union of India Vs. Ind-Swift Laboratories Ltd. 2011 (2) TMI 6 - Supreme Court - Decided in favour of assessee.
Issues:
1. Short reversal of CENVAT Credit on imported raw material/inputs cleared to Unit-II. 2. Recovery of interest under Rule 14 of the Cenvat Credit Rules, 2004. 3. Grounds of challenge before Commissioner (Appeals) - Revenue neutrality and time-barred issue. 4. Confirmation of interest and Cenvat Credit reversal. 5. Applicability of limitation to interest recovery. 6. Revenue neutrality of the situation. 7. Utilization of CENVAT Credit and interest provisions. Analysis: 1. The case involved a short reversal of CENVAT Credit on imported raw material/inputs cleared to Unit-II by the appellant. The audit revealed a discrepancy in the reversal of CENVAT Credit amounting to Rs. 49,03,104 during the period 2007-08 & 2008-09. The appellant debited the CENVAT Credit and paid part of the interest but contested the balance interest amount of Rs. 5,60,689, claiming they had sufficient CENVAT Credit over the short-reversed amount. 2. The recovery of interest under Rule 14 of the Cenvat Credit Rules, 2004 was proposed through a show cause notice dated 22.01.2010. The adjudicating authority confirmed the recovery of interest. The appellant challenged this order before the Commissioner (Appeals) on grounds of revenue neutrality and being time-barred under Section 11A of the Central Excise Act, 1944. 3. The Commissioner rejected the appeal, leading to the present appeal. During the hearing, the appellant contended that the issue was revenue neutral as the CENVAT Credit reversed was available to Unit-II, citing relevant Supreme Court and High Court decisions. They also argued that the issue was time-barred based on the period in question. 4. The presiding judge noted that the dispute centered on the confirmation of interest and the CENVAT Credit not reversed during the clearance of inputs in 2007-08 & 2008-09. Referring to the decision in Hindustan Insecticides Ltd. Vs. CCE, Ltu, it was held that the interest confirmation was barred by limitation. 5. Additionally, it was found that the inputs were cleared to a sister unit entitled to avail the credit, rendering the situation revenue neutral. The judge emphasized that the credit remained unused in the appellant's account books. 6. Citing the decision in CCE & ST, Bangalore Vs. Bill Forge Pvt. Ltd., it was established that where credit remained unutilized, interest provisions did not apply. This decision considered the Supreme Court ruling in Union of India Vs. Ind-Swift Laboratories Ltd. 7. Consequently, the impugned order confirming interest was set aside, and the appeal was allowed in favor of the appellant, providing consequential relief. The judgment was pronounced in open court on 30.12.2013.
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