2017 (11) TMI 824 - AT - Central Excise

Valuation - compounded levy scheme - whether the appellant is required to pay interest for availing credit during the period 01.07.2008 to 31.08.2009, reversed on 31.08.2009, when they were governed under the provisions of Section 3A of Central Excise Act, 1944 and the Rules made thereunder? - time limitation - Held that - the appellant during the relevant period required to discharge duty under Section 3A of Central Excise Act, 1944 and by the relevant provisions notified there under had been debarred from availing cenvat credit and the entire duty was required to be discharged through cash only. In these circumstances, the appellant s argument carries weight that while pursuing their Writ Petition before the Bombay High Court challenging the viries of the levy, recorded the receipt of inputs and availability of the amount of CENVAT credit of the duty paid on such inputs, in their books of accounts, so as to claim the same in the future, if the issue of viries decided in their favour. Thus, mere recording/taking such credit, in the present circumstances, cannot be equated to availing of credit for utilisation and be inferred that the appellant hadavailed the credit with an intention to utilize the same - appellant are required to pay interest for the period during which the credit was lying in their books of records - besides, during the relevant period they were debarred from utilising the credit in discharging their periodical liability under the compounded levy scheme. Thus, levy of interest is neither attracted nor recoverable under Rule 14 of the CCR, 2004. Time limitation - Held that - the appellant had reversed the entire credit on 31.08.2009 and the demand was issued to them for recovery of interest on 28.09.2010, therefore, the same is barred by limitation, as there is no suppression of fact, nor misdeclaration in the recording the credit in the books of accounts. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Whether the appellant is required to pay interest for availing credit during a specific period.
2. Whether the demand issued for recovery is barred by limitation.

Analysis:

Issue 1:
The appellant, engaged in manufacturing Gutkha and Pan Masala, challenged the levy introduced under the Compounded Levy Scheme. They availed cenvat credit on inputs but did not utilize it for discharging duty as they were debarred from doing so. The appellant argued that the credit availed was for record purposes only, anticipating a favorable outcome from the challenge. The Revenue contended that since the credit was availed in their books, interest is due. The Tribunal found that the appellant was debarred from utilizing the credit and had reversed it before the demand was issued, making the recovery of interest unsustainable. The judgment of the Hon'ble Supreme Court in a similar case was cited, supporting the appellant's position. The recovery of interest was deemed not applicable, and the demand was considered barred by limitation, leading to the appeal being allowed.

Issue 2:
The Revenue argued that the appellant wrongly availed and later reversed the credit, justifying the imposition of interest and penalty. They contended that the appellant's case was distinct from previous judgments. The Tribunal noted that the appellant was debarred from utilizing cenvat credit and had reversed the credit before the demand was issued. The Tribunal found that the recovery of interest and penalty was not justified, as the appellant's actions were in line with the legal provisions applicable to their case. The judgment cited by the Revenue was deemed not directly applicable to the present circumstances. The Tribunal held that the penalties imposed were not valid, and the recovery of interest was unwarranted. The appeal was allowed in favor of the appellant.

In conclusion, the Tribunal ruled in favor of the appellant, setting aside the impugned order and allowing the appeal with any consequential relief as per the law. The judgment was pronounced in open court on 31.10.2017.