2016 (2) TMI 782 - AT - Central Excise

Leviability of interest in respect of credit which was reversed before utilization of the same - Held that - There is no liability under Section 11A(2B) for payment of interest under the facts of the case. The impugned order is set aside and the appeal is accordingly allowed. See COMMISSIONER OF C. EX., GHAZIABAD Versus ASHOKA METAL DECOR (P) LTD. 2010 (4) TMI 738 - ALLAHABAD HIGH COURT

Summary

Issues:
1. Denial of CENVAT Credit availed on CHA services by a 100% EOU.
2. Challenge regarding the confirmation of interest on wrongly availed CENVAT Credit.

Analysis:

Issue 1: Denial of CENVAT Credit availed on CHA services by a 100% EOU
The appellant, a 100% Export Oriented Unit (EOU), availed credit of CHA services but reversed the CENVAT Credit to claim exemption under Notification No. 17/2009-ST. A show-cause notice was issued to deny the CENVAT Credit availed on CHA services. The Revenue contended that interest should be charged regardless of credit utilization. The Commissioner (Appeals) upheld the interest charge citing a circular indicating interest on wrongly taken CENVAT Credit is chargeable. However, the appellant argued that if credit is reversed before utilization, it does not attract Section 11AB of the Central Excise Act. The Tribunal referred to a similar case and held that reversal of credit before refund does not amount to credit availed, thus no interest liability exists.

Issue 2: Challenge regarding the confirmation of interest on wrongly availed CENVAT Credit
The Tribunal analyzed past decisions and found that reversal of CENVAT Credit before utilization does not attract interest liability under Section 11A(2B). Citing precedents and the appellant's specific case, the Tribunal allowed the appeal, setting aside the order confirming interest payment. The decision emphasized that in cases where credit is reversed before actual utilization, interest under Section 11AB is not applicable. The Tribunal's ruling aligned with previous judgments and established that the appellant's actions did not constitute availing credit, thereby eliminating the liability for interest payment.

In conclusion, the judgment clarified the distinction between availing and reversing CENVAT Credit before utilization, determining that in such instances, interest liability does not arise. The analysis highlighted the legal principles governing credit utilization and interest payment, ultimately favoring the appellant's position and overturning the order confirming interest payment.