2014 (3) TMI 744 - AT - Central Excise

Waiver of pre deposit - Reversal of CENVAT Credit - Held that - Appellant had made out a prima facie case in their favour since before the decision of the Hon ble Supreme Court having the view that interest is payable from the date of availment of cenvat credit and even it was not utilized interest is not payable was not available - Following decision of UOI v. Ind-Swift Laboratories Ltd. 2011 (2) TMI 6 - Supreme Court - Stay granted.

Summary

Issues:
1. Cenvat credit reversal and demand of interest.
2. Imposition of penalty equal to cenvat credit.

Issue 1: Cenvat credit reversal and demand of interest

The appellants had taken cenvat credit of Rs. 3,71,444/- which was later reversed on the advice of the Department. It was argued that the credit was wrongly taken in the head office and had not been utilized. The appellants contended that during the relevant period, the prevailing view was that no interest was payable if the credit was not utilized. The Hon'ble Supreme Court's decision on interest payment for unutilized credit was not available at that time. The appellant argued that the notice proposing interest demand and penalty was issued after the limitation period. The Tribunal found that the appellant had a prima facie case in their favor based on the limitation ground. The Supreme Court's decision on interest payment for unutilized credit was delivered after the relevant period. Due to this, the requirement of pre-deposit of all dues was waived, and recovery was stayed during the appeal's pendency.

Issue 2: Imposition of penalty equal to cenvat credit

The appellants argued that since the prevailing view during the relevant period was that no interest was payable on unutilized credit, there was no suppression of facts or misdeclaration warranting the penalty under Section 11AC. The Tribunal acknowledged that the appellant's argument on the limitation ground had merit. The penalty imposed was linked to the cenvat credit amount, which was reversed and not utilized. The Tribunal considered the timing of the Supreme Court's decision and the prevailing understanding during the relevant period. As the penalty was connected to the credit reversal, the Tribunal found that the imposition of penalty might not be justified given the circumstances and the lack of clarity on interest payment for unutilized credit during the relevant period.

This judgment by the Appellate Tribunal CESTAT Bangalore dealt with the cenvat credit reversal, demand of interest, and imposition of penalty equal to the cenvat credit. The Tribunal considered the timing of the Hon'ble Supreme Court's decision on interest payment for unutilized credit and the prevailing understanding during the relevant period. The appellant's argument on the limitation ground was found to have merit, leading to the waiver of pre-deposit and stay on recovery during the appeal's pendency. The penalty imposition was questioned based on the lack of clarity and prevailing views during the relevant period regarding interest payment on unutilized credit.