2019 (7) TMI 502 - AT - Service Tax

Demand of interest and penalty - CENVAT credit wrongly taken and utilized - reversal of the credit prior to the issuance of SCN - Rule 14 of the Cenvat Credit Rules read with proviso to Section 11 A(1) along with section 11(4) of the Central Excise act - HELD THAT - In view of the findings recorded by the ld. Commissioner (Appeals) in para-5 of the impugned order, it was fact that the appellant had revered the cenvat credit under dispute, prior to issue of show cause notice. In this view of the matter, the penalty imposed under Rule 15(2) of Cenvat Credit Rules read with Section 11 AC is set aside. Demand of Interest - HELD THAT - In view of the amended Rule 14, it is held that the appellant is liable for interest only to the extent they have utilized the cenvat credit - Accordingly, the appellant is directed to file the calculation and or evidence before the Adjudicating Authority within a period of 45 days from the date of receipt of this order and the same shall be verified by the Adjudicating Authority. If any interest is found to be payable, the same shall be paid by the appellant within 30 days of such intimation by the Adjudicating Authority. Appeal allowed by way of remand.

Summary

Issues:
1. Confirmation of demand of cenvat credit under Rule 14 of Cenvat Credit Rules.
2. Imposition of penalty under Rule 15(2) of Cenvat Credit Rules.
3. Barred by limitation show cause notice.
4. Liability to pay interest on wrongly taken cenvat credit.

Analysis:

1. The appellant, a Public Sector Undertaking providing telecommunication services, had a demand of cenvat credit of ?15,27,035 confirmed under Rule 14 of the Cenvat Credit Rules. The Commissioner (Appeals) noted that the appellant had reversed the wrong credit, which was verified by the authorities. However, the Commissioner upheld the order-in-original. The appellant contended that the conclusion was erroneous as they had reversed the disputed amount in October 2010, supported by proper records and vouchers of transactions. The Tribunal found that the appellant had indeed reversed the cenvat credit before the show cause notice was issued, leading to the setting aside of the penalty imposed under Rule 15(2) of Cenvat Credit Rules.

2. The appellant argued that the show cause notice issued after more than 20 months was barred by limitation. The Tribunal acknowledged this argument and set aside the penalty under Rule 15(2) of Cenvat Credit Rules, as the reversal of cenvat credit had been done prior to the notice being served.

3. Regarding the liability to pay interest on wrongly taken cenvat credit, the appellant contended that they should not be liable for interest due to a change in the rule providing for interest only when the credit is wrongly taken and utilized. The Tribunal agreed with this interpretation of the amended Rule 14 and directed the appellant to submit calculations and evidence to the Adjudicating Authority within 45 days. If any interest was found payable, it was to be paid within 30 days of notification by the Adjudicating Authority.

In conclusion, the Tribunal allowed the appeal with consequential benefit, setting aside the penalty and directing the appellant to address the interest payment based on the revised rule.