2018 (3) TMI 61 - AT - Central Excise

Interest u/s 11AB of CEA 1944 read with rule 14 of CCR 2004 - CENVAT credit availed prematurely - Held that - This contingency is relatable not to the time of availment but to the eligibility for availment. In the scheme that is primarily intended to set off the cascading effects of taxation by permitting the drawal from such a pool of credit for discharge of duty/tax obligation, there can be no other interpretation - there is no justification for demand of interest which, under rule 14 of CCR 2004, is recoverable only on wrongly taken/utilized credit - appeal allowed - decided in favor of appellant.

Summary

Issues: Interest liability under section 11AB of Central Excise Act, 1944 read with rule 14 of CENVAT Credit Rules, 2004 and penalty under rule 15(1) of CENVAT Credit Rules 2004.

In this case, the appellant, M/s CEAT Ltd., appealed against the imposition of interest liability and penalty for allegedly availing CENVAT credit prematurely from January 2008 to March 2011. The dispute revolved around the timing of availing credit on inputs delivered directly to the job-worker's premises before being brought to the appellant's premises. The Commissioner of Central Excise (Appeals) upheld the interest liability and penalty, leading to the appeal before the tribunal.

The appellant argued that they availed credit upon receipt of inputs at the job-worker's premises, supported by goods receipt notes and challans generated by the ERP system. They contended that there was no dispute regarding credit eligibility or receipt of processed inputs at their premises, emphasizing compliance with rule 4 of CENVAT Credit Rules, 2004. The appellant highlighted that credit utilization occurred only after receiving goods from the job-worker's premises, as per their practice from 2008 to 2011.

The tribunal noted that the conditions for availing CENVAT credit, as per rule 4 of CENVAT Credit Rules, 2004, include delivery of goods at the job-worker's premises on the manufacturer's direction, with credit availment starting upon goods receipt. The tribunal emphasized that the rules do not restrict credit availment timing as long as input receipt and utilization are undisputed. It clarified that interest under rule 14 of CENVAT Credit Rules, 2004 is applicable only on wrongly taken/utilized credit, not on timing issues. The tribunal highlighted the primary objective of credit accumulation for tax obligation discharge, emphasizing that record-keeping challenges should not hinder this objective.

Ultimately, the tribunal ruled in favor of the appellant, setting aside the impugned order and allowing the appeal. It held that the invocation of rule 14 against the appellant for alleged improper credit availment lacked legal authority. The judgment was pronounced on 12/01/2018 by the tribunal.