2017 (6) TMI 1137 - AT - Central Excise

Waiver of penalty and interest - suo moto credit taken by appellant, which was reversed on being pointed out - Rule 6 of the CCR, 2004 - Held that - Rule 14 states that the interest is chargeable on the amount either wrongly taken or utilized - Therefore even if the credit was not utilized, the interest is chargeable even on taking credit also therefore the interest is correctly chargeable as held by Hon ble Supreme Court decision in the case of Union of India Vs. Ind-Swift Laboratories Ltd. 2011 (2) TMI 6 - Supreme Court - interest waived. Penalty - Held that - the issue whether 8% 10% the reversal is required in case of exempted goods supplied under N/N. 10/97 -CE was contentious. Initially the issue was decided in favor of the assessee in the case of Andhra Pradesh Paper Mills Ltd. 2004 (11) TMI 229 - CESTAT, BANGALORE and subsequently the same was reversed by the Hon ble Supreme Court in the case of Amrit Paper 2006 (7) TMI 7 - SUPREME COURT OF INDIA . In this fact of the case, the penalty is not imposable - penalty waived. Appeal allowed - decided partly in favor of appellant.

Summary

Issues:
Waiver of penalty and interest on Cenvat credit taken and subsequently reversed.

Analysis:
The case involved the appellant, engaged in manufacturing IT products, who took suo-moto credit under Rule 6 of the Cenvat Credit Rules, 2004, for goods supplied to research institutions. The appellant reversed the credit after a show cause notice was issued, following a decision by the Hon'ble Supreme Court in a similar case. The Commissioner (Appeals) upheld the demand for recovery but reduced the penalty imposed. The appellant contested the demand for interest and penalty, arguing that since the credit was not utilized, interest should not be charged. The issue revolved around the interpretation of Rule 6 and the conflicting decisions in different cases.

The Assistant Commissioner (A.R.) reiterated the findings of the impugned order, emphasizing the chargeability of interest under Rule 14 even if the credit was not utilized. The Assistant Commissioner also acknowledged the contentious nature of the issue regarding the reversal of credit for exempted goods supplied under a specific notification. The Assistant Commissioner agreed with the appellant's counsel that the penalty should not be imposed due to the conflicting judicial decisions on the matter.

The Member (Judicial) carefully considered the submissions from both sides. Regarding interest, the Member noted that Rule 14 mandates the recovery of interest on wrongly taken or utilized Cenvat credit, as established by a previous Supreme Court decision. Therefore, the interest was deemed correctly chargeable. However, concerning the penalty, the Member agreed with the appellant's argument that the issue of reversal of credit for exempted goods was contentious due to conflicting judicial precedents. In light of this, the Member set aside the penalty imposed by the lower authority and partially allowed the appeals, modifying the impugned order accordingly.

In conclusion, the judgment addressed the waiver of penalty and interest on Cenvat credit taken and subsequently reversed by the appellant, analyzing the conflicting judicial decisions and the applicability of relevant rules and precedents in determining the outcome of the case.