2017 (3) TMI 838 - AT - Central Excise

Liability of interest - reversal of credit - whether interest in liable to be paid till such time the credit is reversed? - Held that - reliance placed in the decision in the case of Shree Cement Ltd. Vs. CCE Jaipur 2016 (12) TMI 582 - CESTAT NEW DELHI , where it was held that even when the Cenvat Credit has not been utilized, though taken wrongly the liability of interest would arise for the period when it was lying in the account of the assessee - appeal dismissed - decided against appellant.

Summary

Issues:
Dispute over inadmissible Cenvat Credit availed during a specific period when the final product was exempted from duty payment, leading to the question of whether interest is payable on the inadmissible credit even if it was reversed without utilization.

Analysis:
The appellant, engaged in manufacturing Solar PV Modules, availed Cenvat Credit on capital goods inputs and input services during the period of September 2008 to July 2009. However, the final product cleared by the appellant during this time was exempted from duty payment under notification no. 6/2006-CE. The Department contended that since the final product was exempted, the appellant was not entitled to avail the Cenvat Credit as per Rule 6(1) of the Cenvat Credit Rules 2004. The appellant reversed the credit upon realization of the inadmissibility, but the Department issued a show cause notice resulting in an order for recovery of the inadmissible credit and payment of interest as per section 11AB of the Central Excise Act 1944. The appellant appealed against this order.

During the hearing, the appellant's counsel admitted the inadmissibility of the credit but argued against the levy of interest, citing cases where it was held that no interest is payable if the inadmissible credit is reversed without utilization. On the other hand, the Department's representative contended that interest is payable from the date of availing the credit till its reversal, referring to the amendment in Rule 11 of the Cenvat Credit Rules in 2013. The Department relied on previous case laws to support their argument.

The Tribunal noted that the inadmissible credit was not disputed, and the only contention was regarding the liability for interest on the reversed credit. The appellant cited various decisions supporting their stance, but the Tribunal referred to the Supreme Court's ruling in the case of Ind-Swift Laboratories Ltd. for the period before the 2012 amendment. The Tribunal also mentioned a recent case involving Shree Cement Ltd., where it was held that interest is payable even if the inadmissible credit was not utilized.

By following the Supreme Court's decision and other relevant case laws, the Tribunal upheld the Department's order, stating that interest is payable on the inadmissible credit even if it was reversed without utilization. The appeal was dismissed based on these grounds, and the impugned order was upheld.