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2014 (9) TMI 839 - AT - Central ExciseIrregular availment of Cenvat credit - recovery of interest on the Cenvat credit availed wrongly - held that - where the Cenvat credit is taken or utilised or erroneously refunded, the same along with interest shall be recovered from the manufacturer or the provider of the output services and the provisions of Sections 11A and 11AB shall apply mutatis mutandis for effecting such recoveries. Recovery of interest is under Rule 14. Only the mode of recovery is as provided for under Section 11AB of the Central Excise Act. There is no one to one correlation between taking of credit and its utilisation in the case of Cenvat credit as in the case of set-off. It is in view of this reason, this Tribunal in the case of Dr. Reddy s Laboratories Ltd. (2013 (3) TMI 86 - CESTAT BANGALORE) had come to the conclusion that the decision of the Hon ble High Court in the case of Bill Forge Pvt. Ltd. (2011 (4) TMI 969 - KARNATAKA HIGH COURT) is per incuriam. We are in agreement with the view taken by this Tribunal in the case of Dr. Reddy s Laboratories Ltd. (supra), therefore, we are of the view that the decision of the Hon ble Apex Court in the case of Ind-Swift Laboratories Ltd. case (2011 (2) TMI 6 - Supreme Court) would apply to the facts of the present case before us and the appellant is liable to discharge interest liability on the Cenvat credit wrongly taken from the date of taking of the credit till such time it is reversed. Therefore, we do not find any infirmity in the impugned order. - decided against assessee.
Issues:
1. Irregular Cenvat credit availed by the appellant. 2. Liability to pay interest on wrongly taken Cenvat credit. 3. Interpretation of Rule 14 of the Cenvat Credit Rules, 2004. 4. Applicability of judicial precedents on interest liability in similar cases. Analysis: Issue 1: Irregular Cenvat credit availed by the appellant The appellant, M/s. Bharat Heavy Electricals Limited, availed irregular Cenvat credit amounting to Rs. 6,47,27,205/- during January 2007 to March 2010 and Rs. 4,26,806/- during 2011-12. The irregular credit was reversed after audit findings. However, interest liability on this irregular credit was not discharged, leading to directions for payment by the Central Excise authorities. The appellant contended that since the credit was not utilized, no interest liability should arise, citing a decision by the Hon'ble High Court of Karnataka in a similar case. Issue 2: Liability to pay interest on wrongly taken Cenvat credit The Revenue argued that interest liability arises even if Cenvat credit is taken but not utilized, referring to a decision by the Hon'ble Apex Court. They highlighted that the Cenvat Credit Rules mandate recovery of interest on wrongly taken credit, irrespective of usage. The Tribunal concurred with this view, emphasizing the disjunctive nature of the rule, which covers both situations of credit taken or utilized wrongly, leading to an accrual of interest liability. Issue 3: Interpretation of Rule 14 of the Cenvat Credit Rules, 2004 Rule 14 of the Cenvat Credit Rules, 2004, governs the recovery of Cenvat credit wrongly taken or refunded. The rule specifies that interest shall be recovered from the manufacturer or service provider in such instances. The Tribunal clarified that the recovery of interest is under Rule 14, with the mode of recovery aligning with Section 11AB of the Central Excise Act. Issue 4: Applicability of judicial precedents on interest liability The Tribunal analyzed conflicting judicial precedents, including the decision of the Hon'ble Apex Court and the Hon'ble High Court of Karnataka. It noted that the High Court's view did not consider Rule 3 of the Cenvat Credit Rules, which allows for credit to be taken upon receiving inputs and utilized at a later time. Based on this, the Tribunal found the High Court's decision to be per incuriam and upheld the Apex Court's ruling on interest liability for wrongly taken Cenvat credit. In conclusion, the Tribunal dismissed the appeal, stating that the appellant is liable to discharge interest on the wrongly taken Cenvat credit as per Rule 14 of the Cenvat Credit Rules, 2004. The decision was based on the interpretation of relevant legal provisions and judicial precedents, emphasizing the mandatory nature of interest recovery in such cases.
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