2016 (12) TMI 724 - AT - Central Excise

Demand of interest - in case of the inputs are cleared as such, the reversal of the Cenvat Credit should be on the consignment basis and not on the last day of the month, this facility for payment of duty on last of the month is in respect of manufactured goods. A show cause notice was issued to demand interest from the appellant - Held that - we find that interest can be demanded under Section 11AB of the Act and the provisions of Section provides that the interest was charged from the first day of succeeding the month in which duty ought to have been paid. Admittedly, the reversal of cenvat credit was done on the last day of the month. In that circumstances, we hold that the provisions of Section 11AB of the Act are not attracted. Consequently, demand of interest is not sustainable. In these circumstances, impugned order deserves no merits, hence set aside - appeal allowed - decided in favor of appellant-assessee.

Summary

Issues:
Appeal against order demanding interest on reversal of cenvat credit.

Analysis:
The appellant appealed against the impugned order demanding interest on the reversal of cenvat credit. The case revolved around the clearance of inputs as such on the last day of the month by the appellants. The Revenue contended that in such cases, the reversal of cenvat credit should be on a consignment basis, not on the last day of the month, as the facility for payment of duty on the last day of the month applies to manufactured goods. A show cause notice was issued, and after adjudication, the proceedings against the appellant were initially dropped. However, the Revenue filed an appeal before the Ld. Commissioner (A), where the demand for interest was confirmed, leading the appellant to appeal to the Appellate Tribunal CESTAT CHANDIGARH.

The appellant's counsel argued that as per Section 11AB of the Act, interest can only be charged from the first day of the month succeeding the month in which duty ought to have been paid. Since the duty was paid by reversing cenvat credit at the end of each month, there was no default at the end of each month, making the demand for interest unsustainable. On the contrary, the Revenue's representative reiterated the findings in the impugned order.

After hearing both parties and considering their submissions, the Tribunal analyzed Section 11AB of the Act. It was observed that interest can indeed be demanded under this section, but the interest should be charged from the first day of the month succeeding the month in which duty should have been paid. Given that the reversal of cenvat credit was executed on the last day of the month in this case, the Tribunal concluded that the provisions of Section 11AB were not applicable. Consequently, the demand for interest was deemed unsustainable, leading to the setting aside of the impugned order. The appeal was allowed with any consequential relief.

In conclusion, the Tribunal's decision was based on a meticulous examination of the provisions of Section 11AB of the Act and the specific circumstances of the case, ultimately leading to the setting aside of the demand for interest on the reversal of cenvat credit by the appellant.