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2018 (12) TMI 163 - AT - Central ExciseDemand of Interest in terms of Rule 14 of Cenvat Credit Rules, 2004 read with Section 11AA of Central Excise Act, 1944 - Held that - From the adjudication order that the appellant had taken credit but not utilized the same and reversed the same prior to the issuance of the show cause notice. The Adjudicating Authority following the Board s Circular dated 03.09.2009 observed that interest is payable even when credit has not been utilized. Larger Bench of the Tribunal in the case of J.K. Tyre & Industries Ltd. v. Asst. Commr. of C.Ex., Mysore 2016 (11) TMI 911 - CESTAT BANGALORE held that wrong availment of Cenvat Credit, interest is not payable, if reversed before utilization. The demand of interest on unutilised Cenvat Credit, cannot be sustained - appeal allowed in part.
Issues:
Dispute over demand of interest under Rule 14 of Cenvat Credit Rules, 2004 read with Section 11AA of Central Excise Act, 1944. Analysis: The appeal involved a dispute concerning the demand of interest amounting to ?47,544, related to the availed but unutilized Cenvat credit. The appellant argued that the interest liability should only be ?12,963, as per their submission before the lower appellate authority. The Departmental Representative supported the lower authorities' decision, asserting that the interest demand was justified. Upon reviewing the case, the adjudicating authority noted that the appellant had reversed the unutilized credit before the show cause notice was issued. Referring to precedents, the authority highlighted conflicting decisions on interest levy in such cases. Notably, the Tribunal's stance in the case of J.K. Tyre & Industries Ltd. and Garden Silk Mills Ltd. favored the assessee when credit was reversed before utilization. The authority ultimately ruled that interest on unutilized Cenvat credit was not sustainable. The judgment referenced various legal decisions, including the Supreme Court's ruling in Commissioner of C. Ex., Mumbai-I v. Bombay Dyeing & Mfg. Co. Ltd., emphasizing that reversing an entry before utilization equates to not taking credit. In the present case, the appellant promptly reversed the credit upon detection of the error and had not utilized it until reversal. Citing the jurisdictional High Court's decision aligned with the Supreme Court's stance, the authority concluded that no interest was payable. Additionally, the penalty under Section 11AC was deemed inapplicable due to the absence of intent to evade duty, as evident from the case facts. Consequently, the demand for interest under Rule 14 of Cenvat Credit Rules 2004 was set aside, and the penalty under Section 11AC of Central Excise Act 1944 was not levied. The appeal was partially allowed based on these findings, modifying the original order accordingly. In summary, the judgment resolved the issue by upholding the demand of interest to the extent of ?12,963 while setting aside the penalty imposed under Rule 15(2) of the Cenvat Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944. The decision was based on the appellant's timely reversal of credit and the absence of intent to evade duty, aligning with relevant legal precedents and interpretations.
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