2015 (10) TMI 1256 - AT - Central Excise

Denial of CENVAT Credit - Imposition of interest and penalty - Held that - Para 4 of the show-cause notice makes allegation that there was utilisation of Cenvat credit of ₹ 9,14,269/- of Additional Duty of Customs taken. But taking of such credit is not permissible. In the case of Bombay Dyeing(supra) , it was the observation of the Supreme Court that unless the credit is utilised there shall be no payment of interest. But such proposition of law was not cited before apex court while deciding the case of Indswift . For no utilisation of Cenvat credit, there shall not be payment of interest. Therefore, learned Adjudicating authority is directed to make a limited exercise to verify the quantum of the credit utilised and calculate interest thereon and direct the appellant to pay the same. The payment of interest shall be subject to adjustment if any already paid by the appellant. Therefore, the matter is remitted back to the learned Adjudicating authority to grant fair opportunity of hearing to the appellant on such limited count. - Since there is confusion in law as to the admissibility of the credit and also utilisation thereof, there shall not be penalty. - Appeal disposed of.

Summary

Issues:
1. Utilization of Additional Duty of Customs as Cenvat credit without permission.
2. Payment of interest for erroneous utilization of Cenvat credit.
3. Confusion regarding the payment of interest due to amendment of law.
4. Applicability of penalty for taking credit due to confusion.
5. Verification of the quantum of credit utilized and calculation of interest.

Analysis:
1. The judgment addresses the issue of the appellant utilizing Additional Duty of Customs as Cenvat credit without proper authorization. The learned counsel acknowledged the mistake and paid interest for the erroneous utilization of &8377; 9,14,269. The law specifies that interest is not payable if there is no utilization of wrong credit taken, as clarified in the judgment of Commissioner of Central Excise, Mumbai-I Vs Bombay Dyeing & Mfg. Co. Ltd. The absence of malafide on the appellant's part led to no adverse view being taken, and no penalty was imposed for the confusion in taking the credit.

2. The Revenue opposed the appellant's proposition, leading to a detailed hearing. The show-cause notice alleged the utilization of Cenvat credit, which was not permissible. The Supreme Court's observation in the case of Bombay Dyeing highlighted that interest is only payable upon credit utilization. The judgment directed the Adjudicating authority to verify the credit utilized, calculate interest, and instruct the appellant to pay accordingly. The payment of interest was subject to adjustment if any amount had already been paid by the appellant.

3. Due to the confusion surrounding the admissibility and utilization of the credit, no penalty was imposed. The judgment emphasized that since there was uncertainty in the law, penalty imposition was not warranted. The matter was remitted back to the Adjudicating authority to provide a fair opportunity for the appellant to address the limited count of interest payment verification. The appeal was disposed of under these terms, and the stay application was similarly resolved.

This comprehensive analysis of the judgment highlights the key issues addressed, the legal arguments presented by both parties, and the final decision rendered by the Tribunal regarding the utilization of Cenvat credit and the payment of interest.