2009 (9) TMI 46 - AT - Service Tax

Interest of reversal of Cenvat credit Held that No penalty was proposed to be levied in the SCN but levied while passing the adjudication order - and imposing penalty of equal amount on the Respondent under Section 78 is not correct as by doing so the Assistant Commissioner has travelled beyond show cause notice regarding interest on reversal of Cenvat credit since the Cenvat credit was utilized before reversal interest is payable on reversal of Cenvat credit.

Summary

In the Appellate Tribunal CESTAT, New Delhi case of 2009 (9) TMI 46, the Revenue appealed against an order-in-appeal that set aside an order-in-original regarding the reversal of wrongly taken and utilized Cenvat credit by the respondent. The respondent, a manufacturer of excisable goods, also provided management consultancy and IPR services. The Department detected the irregularity in November 2005, and issued two show cause notices demanding interest on the wrongly taken Cenvat credit, which had already been returned. The Assistant Commissioner confirmed the interest and Cenvat credit demand, as well as imposed penalties under Section 77 and 78. On appeal, the CCE (Appeals) set aside the demand and penalties, citing a Punjab & Haryana High Court judgment.

The Revenue appealed the CCE (Appeals) decision, arguing that the Cenvat credit demand of Rs. 91,000 should not have been set aside as it was part of the wrongly taken credit. The respondent's counsel contended that the demand and penalties were unwarranted as the disputed amount had already been paid without protest. He also argued that interest should only apply to the utilized amount. The Member (Technical) carefully reviewed the case and found that the Assistant Commissioner had overreached the show cause notices by demanding the utilized credit and imposing penalties. The judgment upheld the interest on the utilized credit but set aside the interest on the unutilized amount. The Assistant Commissioner's order was restored in part, and the rest of the impugned order was upheld. The appeal was disposed of accordingly.