2006 (4) TMI 117 - HC - Central Excise

Wrongly taken credit of additional custom duty paid on bunker foodstuff etc. interest on amount of credit which was lying unutilized and which has been ordered to be reversed - assessee s ROM application pointing out that points regarding non-chargeability of interest on unutilized Cenvat credit were not considered by tribunal was allowed by tribunal holding that charging of interest on the amount of credit lying unutilized is not correct in law - no infirmity in tribunal s order

Summary

Issues:
1. Availing Cenvat credit on additional custom duty paid on old ships.
2. Show-cause notices under rule 57AH for wrongly taking credit.
3. Appeal process before Commissioner (Appeals), CESTAT, and rectification of mistake.
4. Charging of interest on unutilized Cenvat credit.

Analysis:
1. The respondent was availing Cenvat credit under rule 57AB for importing old ships for breaking and utilizing the credit for duty liability on final products.
2. Three show-cause notices were issued under rule 57AH for wrongly taking credit of additional custom duty paid on bunker, foodstuff, etc. The Assistant Commissioner confirmed the demand, and subsequent appeals were rejected until CESTAT allowed rectification of mistake.
3. The appellant filed an appeal challenging the interest levied on unutilized Cenvat credit. The Tribunal held that interest cannot be charged on unutilized credit ordered to be reversed, thus dismissing the appeal as no substantial question of law arose.
4. The Tribunal's finding emphasized that interest on unutilized credit is not applicable when the credit was not availed but lying unutilized. The appeal was dismissed as the appellant failed to point out any infirmity in the order.

This judgment clarifies the eligibility of Cenvat credit on additional custom duty paid on old ships, the process of show-cause notices, and the issue of charging interest on unutilized credit. The Tribunal's decision provides guidance on the correct application of interest in such cases, emphasizing that interest should not be levied on unutilized credit that was ordered to be reversed.