2019 (1) TMI 1035 - AT - Service Tax

Interest on the inadmissible CENVAT credit - credit on capital goods taken but not utilized and is reversed - Rule 14 of CENVAT Credit Rules, 2004 read with Section 75 of the Finance Act, 1994 - Held that - The appellant has taken irregular credit but the same was not utilized and it was merely a book entry - in the case of Shiv Om Paper Mills Ltd. 2015 (9) TMI 1484 - CESTAT NEW DELHI , the Tribunal has held that when full credit was availed instead of 50% of the credit, no interest was required to be paid where the credit taken inadvertently was not utilized. The impugned order demanding interest is not sustainable - appeal allowed - decided in favor of appellant.

Summary

Issues:
Demand of interest on inadmissible CENVAT credit taken on capital goods under Rule 14 of CCR, 2004 read with Section 75 of the Finance Act, 1994 and imposition of penalty under Rule 15(1) of the CCR.

Analysis:
The appeal was against the order confirming a demand of ?75,23,772 on the appellant for interest on inadmissible CENVAT credit taken on capital goods during 2006-07 and a penalty of ?10,000 under Rule 15(1) of the CCR. The appellant, a provider of cellular phone services, had taken excess credit on capital goods during April 2006 to March 2007, violating sub-rule 2(a) of Rule 4 of CCR. A show-cause notice was issued, leading to the confirmation of the demand and penalty by the Commissioner. The appellant contended that merely availing credit without utilization does not attract liability under Rule 14 of CCR, citing various judicial precedents. The AR argued that the appellant violated Rule 4(2)(b) of CCR.

The appellant argued that the impugned order was not sustainable as it failed to appreciate the facts and binding judicial precedents. They emphasized that since the credit was not utilized, there was no liability under Rule 14. The appellant cited several decisions supporting their stance. The Tribunal noted that the appellant had taken irregular credit but not utilized it, following precedents that interest liability arises only when credit is wrongly utilized. Citing judgments, the Tribunal concluded that interest was not sustainable, setting aside the demand.

In conclusion, the Tribunal found that the impugned order demanding interest was unsustainable based on precedents and allowed the appeal of the appellant. The judgment emphasized that interest liability arises when credit is utilized wrongly, not merely availed. The decision was pronounced on 14/12/2018 by the Tribunal.