2015 (10) TMI 1549 - AT - Central Excise

Demand of interest u/s 11AB - Held that - Allegation in the show cause notice is that the appellant utilized the credit cannot be sustained. The adjudicating authority confirmed the demand of interest only on the ground that they have taken the credit and they are liable to pay interest - petitioner utilized the credit of ₹ 5,71,47,138/- only. In this contest, it was held that the appellant/petitioner is liable to pay interest from the date of availing credit and not from the date of utilization. I find that the Hon ble Madras High Court in the case of Strategic Engg Pvt Ltd (2014 (11) TMI 89 - MADRAS HIGH COURT) after considering the decision of the Hon ble Supreme Court in the case of Indo Swift Laboratories Ltd (2009 (7) TMI 98 - PUNJAB & HARYANA HIGH COURT) held that mere taking credit itself would not compel the assessee to pay interest as well as penalty. It is also observed that subsequent amendment Rule 14 of cenvat credit would make it clear. Demand of duty for the extended period of limitation cannot be sustained. payment of interest under Section 11AB to the Central Excise Act as they have not utilised such credit and the imposition of penalty under Section 11AC of the said Act, cannot be sustained. - Decided in favour of assessee.

Issues:
1. Demand of duty for extended period of limitation
2. Demand of interest under Section 11AB
3. Imposition of penalty under Section 11AC

Analysis:

1. Demand of duty for extended period of limitation:
The appellant, engaged in manufacturing Polyester Chips and Polyester Yarn, erroneously availed cenvat credit which was later reversed before utilization. The Central Excise Officers discovered this during a verification in May 2008. A show cause notice was issued in 2009 proposing to appropriate the reversed credit along with interest and penalty. The Adjudicating Authority confirmed the recovery and penalty. The Commissioner (Appeals) upheld this decision. The appellant did not contest the duty demand already paid, but argued against the demand for the extended period of limitation. The appellant's counsel cited various court decisions to support their argument. The Tribunal found that the appellant had reversed the credit before the audit and issuance of the show cause notice, and thus, the demand for the extended period of limitation was not sustainable.

2. Demand of interest under Section 11AB:
The Authorized Representative for Revenue argued that interest should be imposed, citing the Hon'ble Supreme Court's decision in a specific case. The Representative emphasized that the appellant, an organized sector entity, had wrongly taken cenvat credit for electricity charges, retained it for over a year, and then reversed it before an audit. The Representative contended that the appellant's conduct was not bona fide, justifying the imposition of interest and penalty. However, the Tribunal, after considering the facts and arguments presented, found that the demand of interest under Section 11AB could not be sustained as the credit was reversed before utilization and the appellant had not disputed the duty demand already paid.

3. Imposition of penalty under Section 11AC:
The Adjudicating Authority had imposed a penalty equal to the amount of cenvat credit on the appellant. The Authorized Representative for Revenue argued in favor of sustaining the penalty, highlighting the appellant's conduct in wrongly taking and retaining the credit. However, the Tribunal disagreed with this argument. It noted that the appellant had voluntarily reversed the credit upon discovering the error, and there was no evidence of mala fide intent. Therefore, the Tribunal set aside the demand of penalty under Section 11AC, along with the demand of interest, and allowed the appeal filed by the appellant. The Tribunal also dismissed the application for extension of the stay order as infructuous.

In conclusion, the Tribunal ruled in favor of the appellant, setting aside the demands of interest and penalty, and allowing the appeal.

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