2017 (1) TMI 545 - AT - Central Excise

Reversal of CENVAT credit on capital goods wrongly taken - interest liability - Held that - when the Cenvat credit are availed on the inputs or capital goods, the credits get merged and as such, lose their identity. In such situation, considering the credit balance of inputs and capital goods separately is not legally sustainable. The disputed amount has been put into use at least in some of the months by the appellant which will necessarily result in short payment of duty attracting the interest liability - Original Authority is directed to recalculate the interest liability taking into account the combined balance available with the appellant during the impugned period month-wise - appeal allowed by way of remand.

Summary

Issues:
Interest liability on Cenvat credit of duty availed on capital goods denied by Department.

Analysis:
The appeal concerns the interest liability of the appellant on Cenvat credit of duty availed on capital goods, which was later denied by the Department. The Original Authority ordered the recovery of an amount availed as credit of capital goods, which was denied. The Commissioner (Appeals) upheld the demand for interest on appeal. The appellant contended that they had sufficient balance in their credit account except for specific months, and interest liability should only arise for that period, not the entire duration. The appellant argued that the cash balance in the PLA account should be considered to arrive at the balance.

The Appellate Tribunal observed that when Cenvat credits are availed on inputs or capital goods, they merge and lose their identity. Therefore, considering the credit balance of inputs and capital goods separately is not legally sustainable. The Tribunal noted that the cash balance in the PLA account, already in deposit with the Government, can be considered along with the Cenvat credit balance to determine the interest liability. As the disputed amount was used by the appellant in some months, resulting in short payment of duty and attracting interest liability, the Tribunal directed the Original Authority to recalculate the interest liability considering the combined balance available with the appellant month-wise. Since no other issues were raised, the appeal was allowed by way of remand with specific directions.