2018 (12) TMI 1641 - AT - Central Excise

Demand of Interest and penalty - reversal of wrongly availed CENVAT Credit - demand of interest and to impose penalty on the appellant without any appropriation of the cenvat credit amount reversed by the appellant - HELD THAT - In the case of PUNJAB NATIONAL BANK VERSUS CCE ST, CHANDIGARH 2017 (1) TMI 1582 - CESTAT CHANDIGARH the issue came before this Tribunal that without any appropriation of demand, interest cannot be demanded and penalty cannot be imposed and this Tribunal after going through the facts of that case, held that Admittedly, in this case the SCN has not been issued to the appellant to demand of interest only and to impose penalty. As no demand of service tax has sought to be confirmed by way of show cause notice against the appellant, interest and penalty cannot be demanded. As in this case also there is no appropriation of the demand on account of denial of cenvat credit, in that circumstances, the demand of interest and penalty imposed on the appellant are not sustainable - appeal allowed - decided in favor of appellant.

Summary

Issues:
Demand of interest and penalty on appellant for availing cenvat credit and claiming depreciation simultaneously.

Analysis:
The appellant was demanded interest and penalty for availing cenvat credit on capital goods while also claiming depreciation under the Income Tax Act. The Cenvat Credit Rules state that if depreciation is claimed on capital goods before income tax authorities, cenvat credit cannot be claimed. Upon Audit pointing out the issue, the appellant reversed the cenvat credit availed. Subsequently, a show cause notice was issued without any appropriation of the reversed cenvat credit amount, leading to the confirmation of interest and penalty. The appellant challenged this decision.

During the hearing, it was noted that in a previous case, Punjab National Bank vs. CCE & ST-Chandigarh, it was established that interest cannot be demanded and penalty imposed without appropriating the demand amount. Referring to another case, Total Security System, where service tax was not paid on time, it was highlighted that without confirmation of the service tax demand, interest and penalty could not be upheld. Similarly, in the current case, since there was no appropriation of the demand due to denial of cenvat credit, the imposition of interest and penalty on the appellant was deemed unsustainable. Consequently, the impugned order was set aside, and the appeal was allowed with any consequential relief.

In conclusion, the judgment emphasized the necessity of appropriating demand amounts before imposing interest and penalties on taxpayers. The decision was based on legal precedents and highlighted the importance of confirming service tax demands before enforcing such financial liabilities on appellants.