2015 (10) TMI 667 - HC - Central Excise

Wrongful availment of CENVAT Credit - Held that - Issue relating to whether interest is payable for having wrongly taken credit in terms of Rule 14 of Cenvat Credit Rules read with Section 11AB of Central Excise Act, 1944 came up for consideration before this Court in (The Commissioner of Central Excise v. M/s. Sundaram Fasteners Limited) 2014 (2) TMI 551 - MADRAS HIGH COURT . Since the issue involved in this appeal is squarely covered by the said decision, applying the said decision, the appeal filed by the Revenue stands allowed - Decided in favour of Revenue.

Summary

Issues:
1. Whether interest is payable for wrongly availing Cenvat credit?
2. Can the Tribunal go beyond the provisions of Cenvat Credit Rules, 2004?

Analysis:

Issue 1: Interest on wrongly availed Cenvat credit
The case involves the appellant, the Revenue, challenging the Tribunal's decision regarding the payment of interest on wrongly availed Cenvat credit. The respondent, a manufacturer of various products, including Fuel Injection Pumps and Parts of IC Engine, availed Cenvat credit on inputs, capital goods, and input services. The Department discovered that the respondent had incorrectly claimed Cenvat credit amounting to Rs. 1,05,66,981 against invoices for capital goods not related to their specific unit. Consequently, a show cause notice was issued demanding interest under Rule 14 of the Cenvat Credit Rules, 2004, along with a penalty proposal. The respondent reversed the credit upon notification of the error. The Tribunal, in its order, ruled that interest is not payable when the credit is reversed before utilization. The Revenue appealed this decision, leading to the current judgment.

Issue 2: Tribunal's authority under Cenvat Credit Rules, 2004
The substantial question of law in this case pertains to whether the Tribunal, as a statutory creation, can exceed the provisions of the Cenvat Credit Rules, 2004, which hold the status of a statute. The Court referred to a previous decision in C.M.A. No. 3477 of 2010 (The Commissioner of Central Excise v. M/s. Sundaram Fasteners Limited) dated 30-1-2014, where a similar issue was addressed. The Court applied the precedent and allowed the Revenue's appeal, setting aside the Tribunal's order. The judgment emphasizes that interest is payable for wrongly taken credit as per Rule 14 of the Cenvat Credit Rules, aligning with the statutory provisions and legal framework governing Cenvat credit transactions.

In conclusion, the High Court of Madras, in this judgment, clarified the liability to pay interest on wrongly availed Cenvat credit and upheld the authority of the Tribunal to operate within the boundaries set by the Cenvat Credit Rules, 2004. The decision underscores the importance of adherence to statutory provisions and legal principles in matters concerning indirect taxation and credit utilization in the manufacturing sector.