2017 (7) TMI 1031 - AT - Central Excise

Liability of interest - Rule 14 of the CCR, 2004 - irregular cenvat credit was reversed immediately on being pointed out - Held that - the issue involved in the present case is no more res integra and has been settled in favour of the assessee by the decision of the Hon ble Karnataka High Court in the case of Bill Forge Pvt. Ltd. 2011 (4) TMI 969 - KARNATAKA HIGH COURT , where it was held that if the credit availed is not utilized there is no liability to pay interest - appeal dismissed - decided against Revenue.

Summary

Issues Involved: Appeal against Order-in-Original setting aside interest and penalty on irregularly availed cenvat credit.

Analysis:
1. Facts of the Case: The appeal was filed by the Department against the Commissioner's order setting aside the Order-in-Original passed by the Joint Commissioner regarding irregularly availed cenvat credit by the respondents, who are manufacturers of paper and paper board. The Department alleged that the respondents had availed cenvat credit irregularly during a specific period.

2. Demand of Interest and Penalty: The Assistant Commissioner issued a show-cause notice proposing to demand a specific amount with interest under Rule 14 of the Cenvat Credit Rules and also imposed a penalty. The Order-in-Original demanded the interest and imposed an equal penalty under the provisions of Rule 15(2) of the Cenvat Credit Rules 2004.

3. Appellant's Argument: The Revenue contended that the impugned order was not sustainable as it ignored the judgment of the Supreme Court in a specific case, emphasizing that interest is payable from the date of irregular availment of cenvat credit.

4. Respondent's Argument: The counsel for the assessee argued that the irregular cenvat credit was immediately reversed upon identification and was not utilized. It was asserted that no interest is payable when the availed credit is not utilized, citing various decisions supporting this stance, including the judgment of the Hon'ble Karnataka High Court and the Tribunal's decision in similar cases.

5. Judgment: After hearing both parties and examining the arguments and precedents cited, it was determined that the issue at hand had been settled in favor of the assessee by previous judicial decisions. The judgment of the Hon'ble Karnataka High Court and the Tribunal's Larger Bench decision supported the view that no interest liability exists when irregularly availed credit is reversed before utilization. Consequently, the impugned order was upheld, dismissing the Revenue's appeal.