2018 (7) TMI 243 - AT - Central Excise

Demand of Interest and penalty - wrongly availed credit was reversed immediately on being pointed out - whether the CENVAT credit availed wrongly and reversed subsequently without actually using it would attract interest or not? - Held that - The issue is squarely covered by the decision of the jurisdictional High Court in the case of Commissioner of Central Excise, Madurai Vs. Strategic Engineering 2014 (11) TMI 89 - MADRAS HIGH COURT , where it was held that mere taking itself would not compel the assessee to pay interest as well as penalty - the appellant is not liable to pay interest or penalty - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Wrong availing of CENVAT credit on input services twice.
2. Liability for interest and penalty under Rule 15(1) of CENVAT Credit Rules, 2004.

Analysis:

Issue 1:
The appellants were found to have wrongly availed CENVAT credit of duty on input services twice on the same set of invoices during 2007-08 and 2008-09. Upon discovery, they admitted the error and reversed the wrongly availed credit immediately. The department issued a show cause notice proposing interest of ?10,86,324 and penalty under Rule 15(1) of CENVAT Credit Rules, 2004. The adjudicating authority confirmed the demand, leading the appellants to appeal before the Tribunal.

Issue 2:
The main contention revolved around whether the wrongly availed CENVAT credit, which was subsequently reversed and not utilized, would attract interest and penalty. The appellant argued that they had a continuous CENVAT credit balance due to an inverted duty structure and the error occurred due to software system and internal control errors. They cited precedents, including a decision by the jurisdictional High Court, which emphasized that the mere availing of credit without utilization does not mandate the payment of interest or penalty. The Tribunal, in line with the High Court decision, ruled in favor of the appellant, holding that they were not liable to pay interest or penalty. Consequently, the impugned order was set aside, and the appeal was allowed with any consequential relief.

This judgment highlights the importance of differentiating between the mere availing of credit and its actual utilization when determining the liability for interest and penalty under the CENVAT Credit Rules. The decision underscores the significance of legal precedents in interpreting and applying tax laws, providing clarity on the consequences of erroneous credit availment in the absence of utilization.