2017 (3) TMI 925 - AT - Central Excise

Liability of interest - erroneous CENVAT credit reversed on being pointed out - appellant case is that there is no justification for demanding interest in respect of Cenvat Credit since the credit was never utilized before the same was reversed - Held that - the issue has been settled in favour of the appellant for the period prior to the date of amendment of rule 14. It has been held consistently that there will be no liability to pay interest in these cases where Cenvat Credit was taken erroneously but reversed without utilization - appeal allowed - decided in favor of appellant.

Summary

Issues:
Challenge to order on credit availed erroneously and interest liability.

Analysis:
The appeal challenged an order by the Commissioner regarding the erroneous availing of Cenvat Credit amounting to ?51,07,765 during 2007-08 to 2008-09. The appellant, engaged in manufacturing CI casting and engine parts, reversed the credit upon realization of the error. The Revenue contended that interest of ?7,99,990 on the erroneously availed credit was payable from the dates of availing till reversal. The appellant argued against the interest demand, stating the credit was never utilized before reversal.

The Counsel for the appellant argued that interest should not be demanded for erroneously taken credit if not utilized. The Revenue, however, supported the impugned order, citing various case laws. It was noted that Rule 14 of the Cenvat Credit Rules was amended in 2015, making interest payable only when erroneously taken credit was utilized. The undisputed facts revealed that the appellant reversed the credit promptly and did not utilize it for excise duty discharge until reversal.

The Tribunal found in favor of the appellant for the period before the rule amendment, citing precedents. Notably, in a recent decision involving TNT (India) Pvt. Ltd., the Tribunal ruled that recovery of interest under Rule 14 of the Cenvat Credit Rules was not applicable in cases where erroneously taken credit was promptly reversed without utilization. The Tribunal's decision was influenced by various High Court judgments supporting this stance.

Consequently, the impugned order was set aside, and the appeal was allowed with consequential benefits for the appellant. The decision aligned with the precedent set by the co-ordinate bench in the TNT (India) Pvt. Ltd. case, providing relief to the appellant in this matter.