2015 (12) TMI 1050 - AT - Central Excise

Demand of interest on the credit wrongly taken and reversed before utilizing the same - whether interest is chargeable on the cenvat credit wrongly taken, though the same is reversed before utilization of the credit - Held that - it is seen that there are judgements of various High Courts which have taken different views referring to the Hon ble Apex Court judgement in the case of Indo Swift Laboratories case 2011 (2) TMI 6 - Supreme Court . I find that the Hon ble High Court of Madras in Strategic Engineering (P) Ltd. 2014 (11) TMI 89 - MADRAS HIGH COURT has not only analysed the judgement laid in Ind Swift Laboratories case and M/s.Bill Forge (P) Ltd. case 2011 (4) TMI 969 - KARNATAKA HIGH COURT , but has also gone one step further by considering the subsequent amendment brought forth in Rule 14 of Central Excise Rules, 2004. This Tribunal in the case of Gurmehar Construction Vs. CCE, Raipur 2014 (7) TMI 849 - CESTAT NEW DELHI followed the judgement in M/s.Bill Forge (P) Ltd. case. In this background of judicial dispositions on the issue, I am inclined to follow the judgement laid by Hon ble High Court of Karnataka in the case of M/s.Bill Forge (P) Ltd. which has been endorsed by the Hon ble High Court of Madras in Strategic Engineering (P) Ltd. case. - interest is not chargeable on the credit wrongly taken which was reversed before utilization. - Decided in favour of assessee.

Summary

Issues:
Challenge to demand of interest on wrongly taken credit reversed before utilization.

Analysis:
The appeal challenges the demand of interest on the credit wrongly taken and reversed before utilization. The appellant, engaged in manufacturing excisable goods and providing services, had wrongly taken credit on inputs but reversed it before utilization. The dispute arose when the department demanded interest on the wrongly taken credit. The appellant argued that as the credit was reversed before utilization, no interest was payable. The department issued a show cause notice proposing the interest demand and penalty, which was confirmed in the Order-in-Original and upheld by the Commissioner (Appeals), leading to the appeal before the Tribunal.

The main contention revolved around Rule 14 of the Cenvat Credit Rules, 2004, which mandated the recovery of wrongly taken or erroneously refunded credit along with interest. The appellant argued that interest was not payable as the credit was reversed before utilization. The appellant relied on various judgments supporting their stance, while the Revenue contended that interest was chargeable even if credit was reversed before utilization, citing relevant judgments including a decision by the Hon'ble Apex Court in the appellant's own case.

The Tribunal analyzed the conflicting judgments from different High Courts regarding the chargeability of interest on wrongly taken credit reversed before utilization. Notably, the Tribunal referred to the Hon'ble High Court of Karnataka's detailed analysis in the case of M/s. Bill Forge (P) Ltd. and the subsequent amendment in Rule 14 of the Cenvat Credit Rules, 2004. The Tribunal ultimately held that interest is not chargeable on credit wrongly taken and reversed before utilization, aligning with the judgments in M/s. Bill Forge (P) Ltd. and Strategic Engineering (P) Ltd. cases.

In conclusion, the Tribunal set aside the impugned order, allowing the appeals and ruling that interest is not chargeable on wrongly taken credit that was reversed before utilization.