2017 (12) TMI 1279 - AT - Central Excise

Liability of interest and penalty - CENVAT credit reversed - case of appellant is that demand of interest and penalty not justified as the credit was not wrongly availed but due to change over of management as the credit was availed by the earlier company which was amalgamated in company of the present appellant - Held that - it is not a case of wrong availment of credit, this is due to amalgamation of old company to present company, records were not traceable. The appellant have admittedly reversed the credit, moreover credit so taken was not utilized - there is no reason to impose penalty u/s 11AC - penalty set aside. Interest - Held that - Since Rule 14 was amended from 1-4-2012 interest thereafter would be chargeable only when Cenvat credit was taken and utilized. Therefore after 1-4-2012 interest would not be chargeable when the credit was not utilized - interest on the Cenvat credit is chargeable upto 31-3-2012 and interest from 1-42012 is set aside. Appeal allowed in part.

Summary

Issues: Availment of Cenvat credit, imposition of penalty under Section 11AC, demand of interest under Rule 14.

Availment of Cenvat credit: The appellant had availed Cenvat credit on input, capital goods, and input service, which was reversed after being pointed out, but the applicable interest was not paid. The issue revolved around whether the credit was wrongly availed due to the amalgamation of the old company with the present company, leading to untraceable records. The appellant argued that there was no wrong availment of credit as it was unutilized and due to the change in management. The Tribunal found that it was not a case of wrong availment, considering the amalgamation and the unutilized credit, thus setting aside the penalty under Section 11AC.

Imposition of penalty under Section 11AC: The Revenue contended that the appellant was liable to pay interest from the time of availing the Cenvat credit, even if not utilized, citing various judgments. However, the appellant argued against the imposition of penalty and interest as the credit was unutilized. The Tribunal referred to conflicting judgments but relied on the decision of the Hon'ble Bombay High Court to hold that interest is chargeable on Cenvat credit availed up to 31-3-2012. After the amendment of Rule 14 from 1-4-2012, interest would only be chargeable when the credit was taken and utilized. Consequently, the Tribunal set aside the penalty under Section 11AC and determined the period for interest liability accordingly.

Demand of interest under Rule 14: The Tribunal considered the applicability of interest on the Cenvat credit availed by the appellant. It analyzed the legal provisions and conflicting judgments to establish the liability for interest. Referring to the amendment in Rule 14 from 1-4-2012, the Tribunal concluded that interest on the Cenvat credit was chargeable only up to 31-3-2012, with no interest applicable after that date if the credit remained unutilized. The decision was based on the interpretation of relevant legal precedents and the amended rule, leading to the partial allowance of the appeal with specific terms outlined for the penalty and interest liabilities.