2020 (1) TMI 1057 - AT - Central Excise

Demand of interest and penalty - excess availment of CENVAT Credit - non-utilization of such credit - appellant reversed the credit before issuance of SCN - extended period of limitation - HELD THAT - Since the excess cenvat credit was available to the appellant in the next financial year and further the appellant had not utilized the excess cenvat credit the appellant is not liable to pay interest on the excess credit of 72, 100/- - With regard to excess availment of other credit It is found that the appellant has reversed the credit on being pointed out by the audit much before the issuance of the show-cause notice which was issued on 31/01/2018 - Further the appellant during the disputed period had sufficient balance in their cenvat credit account and they have not utilized the same. Thus in view of the decision of the Karnataka High Court in the case of COMMISSIONER OF CENTRAL EXCISE SERVICE TAX LARGE TAXPAYER UNIT BANGALORE VERSUS M/S BILL FORGE PVT LTD BANGALORE 2011 (4) TMI 969 - KARNATAKA HIGH COURT and Larger Bench decision of this Tribunal in the case of J.K. TYRE INDUSTRIES LTD. VERSUS ASST. COMMR. OF C. EX. MYSORE 2016 (11) TMI 911 - CESTAT BANGALORE the appellant is not liable to pay the interest. Demand set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Appeal against impugned order partially allowing CENVAT credit on steel items
- Discrepancies in availed credits leading to demand notices
- Arguments on sustainability of impugned order
- Reversal of excess credit before utilization
- Liability for payment of interest on excess credits
- Applicability of judicial precedents in deciding the case

Analysis:
1. The appeal was filed against the impugned order partially allowing CENVAT credit on steel items while upholding the demand notices issued due to discrepancies in availed credits. The appellant, engaged in sugar and molasses manufacturing, faced demands for excess CENVAT credits on various items. The Assistant Commissioner's Order-in-Original confirmed the demands, leading to an appeal before the Commissioner(Appeals).

2. The appellant argued that the impugned order lacked sustainability in law as it failed to consider facts, laws, and binding judicial precedents. The appellant highlighted instances of excess credit availed but not utilized, citing judicial decisions supporting their position. Additionally, the appellant reversed excess credits promptly upon audit team's notification, negating the need for interest payments as per Rule 14 of the CENVAT Credit Rules, 2015.

3. The appellant contended that liability for interest on excess credits does not arise if credits are reversed before utilization, supported by precedents from various Tribunals and High Courts. The argument emphasized that the excess credit was a mere book entry, as the appellant had sufficient balance in their CENVAT account to cover the deficit. The appellant further criticized the issuance of show-cause notices invoking longer periods for demanding interest and penalties.

4. The AR defended the impugned order, leading to a detailed consideration of submissions from both sides. The judicial member, after careful review, found merit in the appellant's arguments. The member ruled that the appellant was not liable to pay interest on excess credits, as they were available in the next financial year and not utilized. The reversal of credits before the show-cause notice, along with sufficient balance in the CENVAT account, further supported the decision to set aside the impugned order.

5. The decision was influenced by the Karnataka High Court's ruling in a similar case, distinguishing it from the judgment relied upon by the Commissioner(Appeals). By following the precedent set by the Karnataka High Court, the judicial member concluded that the impugned order was not sustainable in law. Consequently, the appeal was allowed, providing the appellant with consequential relief.

(Order was pronounced in Open Court on 27/01/2020)