2017 (1) TMI 600 - AT - Central Excise

Whether the appellant is required to pay interest and also needs to be penalized for non-reversal of Cenvat credit lying in balance? - reversal of credit against refund order. Held that - There is no provisions in the Cenvat Credit Rules, 2004 which requires the appellant-assessee to reverse the Cenvat credit against the receipt of refund order. There is also no provision which mandates for demand of interest for late deposit of the refund cheque given to an assessee. In the absence of any such provision, demand of interest from the appellant for the period from the date of issue of cheque till the date of deposit for non-reversal of Cenvat credit seems inconsistent with law - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Whether the appellant is required to pay interest and be penalized for non-reversal of Cenvat credit.

Analysis:
- The issue in consideration was whether the appellant needed to pay interest and face penalties for not reversing the Cenvat credit despite receiving a refund order. The appellant had sought a refund claim for unutilized Cenvat credit, which was subsequently sanctioned, and the cheques were deposited in the bank with a delay. The Revenue contended that the appellant should have reversed the Cenvat credit upon receiving the refund order to avoid interest and penalties.

- The judge found no merit in the lower authorities' findings, stating that there were no provisions in the Cenvat Credit Rules, 2004 mandating the appellant to reverse the credit upon receiving the refund order. Additionally, there was no provision requiring interest for late deposit of refund cheques. The appellant clarified that the Cenvat credit in question was not utilized for duty payment and was reversed upon cheque deposit. As there was no evidence of misuse of the refund amount, the demand for interest and penalties was deemed inconsistent with the law.

- The judge highlighted that without any allegation of improper utilization of the refund, there was no legal basis for demanding interest or penalizing the appellant for delayed reversal of Cenvat credit. Consequently, the impugned order was set aside, and the appeal was allowed, emphasizing the absence of legal provisions supporting the Revenue's claims.

- In conclusion, the judgment clarified the legal stance on the reversal of Cenvat credit, emphasizing the necessity of legal provisions to enforce interest and penalties. The decision was based on the lack of statutory requirements for immediate reversal upon refund order receipt and the absence of misuse allegations regarding the Cenvat credit in question.