2017 (12) TMI 538 - AT - Central Excise

Liability of interest - Rule 14 of CCR 2004 - wrong availment of CENVAT credit - Held that - appellant had availed Cenvat credit on capital goods which are received in the factory of the appellant as per the CCR, 2004. Appellant was entitled to take credit immediately on receipt of the capital goods in the factory. Once it was decided by the appellant that the machines not to be installed in the factory they suo moto reversed credit and declared in their ER-1 return in Feb, 2011 - In this fact availment of credit was legal and correct and hence it cannot be said that Cenvat credit was wrongly taken or utilized. In absence of nature of wrong availment of credit, interest provision under Rule 14 cannot be invoked - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Demand of interest on allegedly wrongly availed Cenvat credit.
2. Interpretation of Rule 14 of Cenvat Credit Rules, 2004 regarding the charging of interest.
3. Applicability of interest recovery in case of correct availing and subsequent reversal of Cenvat credit.

Detailed Analysis:
1. The case involved the appellant, engaged in manufacturing excisable goods, who availed Cenvat credit on capital goods but later reversed the credit as the goods were not used in production. A show cause notice was issued demanding interest on the allegedly wrongly availed credit. The Order-in-Original imposed interest and a penalty, which was partially upheld by the Commissioner(Appeals). The appellant challenged the demand of interest in the present appeal.

2. The appellant's counsel argued that interest under Rule 14 is applicable only when credit is wrongly availed. In this case, the credit was legally availed as per Cenvat Credit Rules, 2004, and reversed when the decision was made not to install the capital goods. The counsel contended that no show cause notice for demanding Cenvat credit was issued, and thus, the interest demand was not sustainable.

3. The Assistant Commissioner representing the Revenue cited a Supreme Court case to support the interest recovery in cases of wrong credit availment. However, the Member (Judicial) analyzed Rule 14 and concluded that interest is chargeable only when credit is wrongly taken or utilized. Since the appellant legally availed the credit and reversed it upon deciding not to use the goods, the demand for interest was deemed incorrect. The judgment set aside the impugned order, allowing the appeal and disposing of the case.

This detailed analysis of the judgment highlights the issues of interest demand on Cenvat credit, the interpretation of Rule 14, and the applicability of interest recovery in cases of correct availing and subsequent reversal of credit.