2019 (5) TMI 956 - AT - Central Excise

Demand of Interest and penalty - reversal of irregularly availed CENVAT credit not utilized - time limitation - HELD THAT - The issue of applicability of interest when credit availed but not utilized for the period prior to amendment of Rule 14 of CENVAT Credit Rules 2004 is no more res integra as held in favour of the Revenue by the jurisdictional Hon'ble Bombay High Court in the case of THE COMMISSIONER OF CENTRAL EXCISE, PUNE-I VERSUS M/S GL V. INDIA PVT LTD 2015 (5) TMI 375 - BOMBAY HIGH COURT where it was held that where CENVAT credit has been taken and utilized wrongly, interest should be payable from the date the CENVAT credit has been utilized wrongly for according to the High Court interest cannot be claimed simply for the reason that the CENVAT credit has been wrongly taken as such availment by itself does not create any liability of payment of excise duty. Time Limitation - HELD THAT - Interest on the inadmissible credit for the relevant period is payable by the appellant. However, since the interest was demanded for the period from 2006 to 2007 in 2009, and in absence of any suppression of facts, the demand of interest is barred by limitation - Consequently, penalty imposed under Section 11AC of CEA,1944 is also not sustainable. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Recovery of interest and imposition of penalty on inadmissible CENVAT Credit.

Analysis:
The appellant availed inadmissible CENVAT Credit during a specific period, which was later reversed upon detection by the Audit Team. A show cause notice was issued for recovery of interest and penalty, leading to an adjudication where interest and penalty were imposed under relevant provisions. The main contention of the appellant was that since the credit was not utilized, interest should not be recoverable. The appellant cited judgments supporting their position, emphasizing that the demand was barred by limitation. On the other hand, the Revenue argued that interest is payable even if the credit was not utilized, referring to various judgments that upheld this view. The Tribunal considered these arguments and referred to the judgment of the Hon'ble Bombay High Court, which held that interest on inadmissible credit is payable. However, the Tribunal found that the demand for interest was barred by limitation, following the judgment of the Hon'ble Delhi High Court. Consequently, the penalty imposed was also deemed unsustainable.

In conclusion, the Tribunal held that interest on inadmissible CENVAT Credit is payable, but the demand for interest was barred by limitation, leading to the penalty imposed under Section 11AC of the Central Excise Act, 1944 being unsustainable. Therefore, the appeal was disposed of in favor of the appellant based on these findings.