2017 (7) TMI 333 - AT - Central Excise

Levy of interest - wrongful availment of CENVAT credit which was reversed, but interest was not paid - Held that - it is clear that the recovery of wrongly availed/utilised credit is to be accompanied by recovery of interest and, for such recovery, section 11A and section 11 AB shall be the instruments. Extended period of limitation - Held that - The proceedings against the appellant were initiated on 12th April 2011 which is clearly beyond the normal period of limitation in connection with the alleged incorrect availment of credit. The period of limitation is liable to be extended only upon a finding of existence of ingredients such as fraud, suppression etc. Invoking of the extended period would, therefore, not be consistent with the findings of the first appellate authority that the wrong availment is nothing but a mistake on the part of the assessee. In these circumstances, the invoking of provisions in section 11A of Central Excise Act, 1944 is not tenable. It is clear from the record that the appellant had reversed the wrongly availed credit immediately upon it being pointed out. Hence, there was no further scope for initiating recovery proceedings in relation to this credit. The charging of interest in the impugned order is not valid and must be set aside - appeal allowed - decided in favor of appellant.

Summary

Issues involved:
Levy of interest on wrongly availed CENVAT credit by M/s Maxheal Pharmaceuticals (India) Ltd.

Analysis:
The dispute in this case revolves around the imposition of interest amounting to ?3,25,469 on CENVAT credit of ?10,66,179 that was incorrectly availed by the assessee, M/s Maxheal Pharmaceuticals (India) Ltd. The appellant, primarily an exporter, had accumulated substantial credit in the CENVAT account, with the disputed amount being a minimal fraction of the total credit. The first appellate authority relied on a strict interpretation of rule 14 of the CENVAT Credit Rules, 2004, emphasizing that interest liability arises when credit is wrongly taken, utilized, or erroneously refunded. Circulars from the Central Board of Excise & Customs were cited to support the demand for interest. However, it was acknowledged that the incorrect availment was likely a clerical error, given the substantial credit balance of the assessee.

The provisions of rule 14 of the CENVAT Credit Rules, 2004 state that recovery of wrongly availed or utilized credit must be accompanied by the recovery of interest, invoking sections 11A and 11AB for such actions. The proceedings against the appellant were initiated beyond the normal limitation period, indicating that the extended period should only apply in cases involving fraud or suppression. Since the incorrect credit was promptly reversed upon discovery, the initiation of recovery proceedings, including interest, was deemed unnecessary. The judgment referred to a case where the High Court held that interest liability arises only when the benefit of the credit is taken and not promptly reversed, which aligns with the circumstances of this case.

Consequently, the tribunal concluded that the imposition of interest in the impugned order was unjustified and must be set aside. The appeals were allowed in favor of M/s Maxheal Pharmaceuticals (India) Ltd.