2016 (9) TMI 684 - AT - Central Excise

Cenvat Credit - pre-mature credit on input services - credit availed before making payment - Scope of Rule 4(7) of Cenvat Credit Rules, 2004 - Held that - Merely because the respondent have made an entry in their records prior to the date when the credit became due to them, would not result in denial of the credit. Similarly, if the credit has not been utilized by them prior to the said date of admissibility; no demand of interest can be made against them and no penalty can be imposed. Cenvat credit being a substantial benefit cannot be disallowed on the technicalities. - Decision in the case of CCE, Surat II vs. White En-All Pvt. Ltd 2003 (10) TMI 533 - CESTAT, MUMBAI followed - Decided in favor of assessee.

Summary

Issues:
- Availment of input services credit before payment
- Denial of credit, interest, and penalty

Analysis:
1. Availment of input services credit before payment:
The case involved the appellant, engaged in manufacturing glass shells, availing input credit of service tax before making payment for the services, contrary to Rule 4(7) of the Cenvat Credit Rules, 2004. The Revenue contended that credit cannot be allowed before payment. However, the Commissioner (Appeals) observed that the appellant ultimately paid for the services and service tax, though prematurely availed the credit. The Tribunal referred to a similar case and held that denying credit solely based on premature availing is unjustified. The appellant paid interest for the interim period, did not utilize the credit prematurely, and ultimately became entitled to it, leading to the rejection of the Revenue's appeal.

2. Denial of credit, interest, and penalty:
The Revenue argued for denying credit due to premature availing, demanding interest for the interim period, and imposing a penalty under Section 11AC of the Central Excise Act, 1944. However, the Tribunal rejected these contentions. It noted that the appellant did not utilize the credit prematurely, following a Supreme Court ruling that reversed credit before utilization is as if credit was not taken. As the demand for wrong availment of credit was deemed unsustainable, no penalty under Section 11AC was warranted. The Tribunal upheld the Commissioner (Appeals) decision, emphasizing that technicalities should not disallow substantial benefits like Modvat credit and that denial of credit, interest, or penalty was unwarranted in this case.

In conclusion, the Tribunal dismissed the Revenue's appeal, affirming the Commissioner (Appeals) decision to allow the credit availed by the appellant, reject the demand for interest, and decline the imposition of a penalty. The judgment highlighted the importance of substance over technicalities in matters concerning credit availment and payment compliance under the Cenvat Credit Rules, 2004.