2020 (2) TMI 1491 - AT - Central Excise

Reversal of CENVAT Credit or not - irregular Cenvat credit of Cess on custom duty - levy of interest - HELD THAT - On perusal of the entire case records, it is seen that the Appellant has done the said reversal from the opening balance of Cenvat credit in ER-1 return of the month of May 2014 which has already been verified and hence in my considered view, there is no further reversal required in the matter. Hence the demand to the extent of ₹ 94,120/- as confirmed by the ld. Commissioner (Appeals) deserves to be set aside accordingly. Demand of Interest - HELD THAT - The Appellant has asserted that it had sufficient credit balance in its account and also produced a Chartered Accountant certificate for the same. Based on the applicable provisions under Rule 14 of the CENVAT Credit Rules, as was in force during the period from April 2012 to March 2013, it is held that the Appellant is not required to pay any interest. The Apex Court in the case of COMMISSIONER OF CENTRAL EXCISE, MUMBAI- I VERSUS M/S BOMBAY DYEING MFG. CO. LTD 2007 (8) TMI 2 - SUPREME COURT has held that where before the utilization of the credit amount, if the entry is reversed, it amounts to not taking credit. Once the credit is reversed before its utilization in the Cenvat account it does not amount to taking of credit. Thus, the provisions of Rule 14 of Cenvat Credit Rules and Section 11AB of the Act are not attracted and neither the penalty nor the interest is chargeable. Since the appellant had sufficient credit balances as noted above, in any case, there would be no loss of Revenue to the exchequer. Therefore, the imposition of interest in the present proceedings cannot sustain and hence, the same is set aside - Appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeal against confirmation of demand of irregular Cenvat credit and interest.
Analysis:
Issue 1: Irregular Cenvat Credit
The appellant contested the demand of ?94,120 as irregular Cenvat credit on custom duty and the interest of ?9,51,500 confirmed by the Commissioner. The appellant argued that the amount had already been reversed by adjusting the opening balance of Cenvat credit in the ER-1 return of May 2014. The Tribunal examined the case records and verified the reversal, concluding that no further reversal was required. The demand of ?94,120 was set aside.
Issue 2: Payment of Interest
Regarding the interest on the confirmed amount of ?9,51,500, the appellant claimed that since only ?4,11,713 was confirmed as demand, the question of interest on the entire amount did not hold. The appellant also highlighted instances where Cenvat credit was irregularly availed but later reversed, arguing against the applicability of interest. The Tribunal referred to legal precedents and the provisions of Rule 14 of the CENVAT Credit Rules, holding that the appellant, having sufficient credit balance, was not liable to pay any interest. Citing judgments from various High Courts, the Tribunal emphasized that interest is compensatory and should be imposed only when there is a delayed payment of duty. As no loss to the exchequer was evident due to the appellant's actions, the imposition of interest was deemed unsustainable and set aside. The appeal was disposed of accordingly with consequential benefits, if any.