2008 (8) TMI 317 - AT - Central Excise

Interest on reversal of Cenvat Credit Manufacturer reversed the credit although not required to do so Cenvat credit reversed by them since the inputs have been issued for manufacture and were contained in semi-finished goods and there is no dispute on this aspect. As regards interest on Cenvat credit of Rs.19, 06, 198/- on the inputs lying as such and destroyed in fire accident in view of the fact that Section 11AB applied to only in cases of non-levy or short levy of excise duty or non-payment of duty by the due date as required under law Section 11AB is clearly not applicable - interest is not demandable under any of the provisions available and relevant to the facts of the case. Therefore the demand of interest on this amount also cannot be upheld. Further in respect of unutilized credit the interest is not payable if the credit has not been utilized the demand for interest on this amount also has to be set aside.

Issues:
Challenging demand for interest on central excise duty paid on finished goods destroyed in fire, Cenvat credit reversed on inputs in semi-finished goods destroyed in fire, Cenvat credit reversed on inputs destroyed in fire, liability for interest on wrongly availed Cenvat credit on capital goods.

Analysis:
The appeal involved challenging the demand for interest on various amounts related to central excise duty and Cenvat credit due to goods destroyed in a fire accident. The appellant admitted liability for interest on finished goods destroyed in the fire. However, the advocate argued against interest on Cenvat credit reversed on inputs in semi-finished goods, citing relevant Tribunal decisions. The advocate contended that the requirements of the Cenvat Credit Rules were fulfilled in this case, thus negating the demand for interest. Regarding Cenvat credit reversed on inputs lying as such, it was argued that Section 11AB did not apply as it pertains to short levy or non-payment of excise duty, not credit reversal. The advocate highlighted Rule 3 of Cenvat Credit Rules, stating that if inputs are destroyed, the assessee must pay an amount equal to the credit availed, with no time limit specified. The advocate also argued against interest on wrongly availed Cenvat credit on capital goods, emphasizing that the credit was not utilized before reversal, thus not liable for interest.

The Revenue contended that interest was payable from the date of availment, especially when 50% of the credit was taken after the capital goods had become scrap. However, the Tribunal found merit in the appellant's arguments. Referring to the Larger Bench decision, it concluded that no interest was due on the Cenvat credit reversed on inputs in semi-finished goods. The Tribunal also held that Section 11AB did not apply to the situation of destroyed inputs, thus rejecting the demand for interest on such credit. Regarding the Cenvat credit on capital goods, the Tribunal agreed that interest was not payable as the credit had not been utilized before reversal, as per the Tribunal decisions cited. Consequently, the appeal was allowed, providing consequential relief to the appellants.

In summary, the Tribunal ruled in favor of the appellants, dismissing the demand for interest on various amounts related to central excise duty and Cenvat credit due to goods destroyed in a fire accident. The decision was based on the fulfillment of Cenvat Credit Rules requirements and the inapplicability of Section 11AB in the given circumstances. The Tribunal's judgment provided relief to the appellants by setting aside the demands for interest, considering the specific circumstances and legal provisions involved in each case.

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