2016 (6) TMI 273 - AT - Central Excise

Recovery of interest for the Cenvat credit wrongly taken, but not utilized - Held that - There is no liability on the appellant assessee to pay interest; consequently, the appeal is allowed in favour of assessee.

Summary

Issues:
Recovery of interest for wrongly taken but unutilized Cenvat credit.

Analysis:

Issue 1: Recovery of interest for wrongly taken but unutilized Cenvat credit
The case involved a dispute regarding the recovery of interest for wrongly taken but unutilized Cenvat credit by M/s The Simbhaoli Sugar Mills Ltd. The appellant argued that an amendment in Rule 14 of Cenvat Credit Rules, 2004, changed the wording from "Cenvat credit taken or utilized wrongly" to "Cenvat credit taken and utilized," implying that liability for interest cannot be imposed if the credit was not utilized. The appellant cited various case laws to support their stance and highlighted a previous order where they were not held liable for interest on wrongly taken credit that was later reversed. On the other hand, the Revenue contended that interest was still payable, referencing a case law to support their argument and emphasizing that the amendment to Rule 14 was not retrospective.

Issue 1 Analysis:
After hearing both parties, the Tribunal examined the facts and submissions. The appellant had mistakenly taken Cenvat credit on goods not entitled to it, totaling around Rs. 4 lakhs, which was later reversed upon audit discovery. It was noted that there was no malafide intention on the part of the appellant. The main issue was whether the appellant, unaware of the ineligibility of the goods for credit, should be liable for interest on the unutilized credit. The Tribunal considered relevant case laws, including the Supreme Court's decision in Union of India Vs. Indo-Swift Laboratories Ltd., which held that interest liability exists even for wrongly taken but unutilized credit. However, the Tribunal distinguished this case from the present situation where the credit was promptly reversed upon detection. Referring to other case laws and the Karnataka High Court's decision, the Tribunal concluded that interest could not be imposed in this scenario, as the credit reversal amounted to non-availment of credit. Therefore, the appeal was allowed, and the appellant was not liable to pay interest on the wrongly taken Cenvat credit that was subsequently reversed.

Final Decision:
The Tribunal ruled in favor of the appellant, holding that there was no liability to pay interest on the wrongly taken but unutilized Cenvat credit. The appeal was allowed, and the appellant was not required to pay the interest amount demanded by the Revenue.

This detailed analysis of the judgment provides a comprehensive understanding of the legal issues involved and the Tribunal's decision regarding the recovery of interest for wrongly taken but unutilized Cenvat credit.