2020 (2) TMI 186 - AT - Central Excise

Reversal of CENVAT Credit - contravention of provisions of Rule 16 of the Central Excise Rules, 2002 and Rule 2, 3(2), 4 of the Cenvat Credit Rules, 2004 read with section 2(f) of the Central Excise Act, 1944 - period of dispute from October 2012 to March 2013. Whether the Appellant has already reversed the amount of ₹ 11,06,691/- as Cenvat credit or not by making an entry in the books of accounts on 30/06/2017 and thereby reducing the amount of Cenvat credit to be transferred in TRAN 1 form in GST? - HELD THAT - The Appellant has done the said reversal in the books of accounts and has thereby not carried the said Cenvat credit into GST regime. Further, the GST regime has been introduced w.e.f. 01/07/2017. Thus, there is no further reversal required in the matter. Hence the demand to the extent of ₹ 11,06,691/- as confirmed by the learned Commissioner (Appeals) deserves to be set aside. Demand of interest - HELD THAT - The Appellant has asserted that it had sufficient credit balance in its account and also produced a Chartered Accountant certificate for the same. Based on the applicable provisions under Rule 14 of the CENVAT Credit Rules, as was in force during the period from April 2012 to March 2013, It is held that the Appellant is not required to pay any interest. Thus, since the appellant had sufficient credit balances, in any case, there would be no loss of Revenue to the exchequer. Therefore, the imposition of interest in the present proceedings cannot sustain and hence, the same is set aside. Appeal disposed off.

Summary

Issues Involved:
1. Disallowance of Cenvat credit and confirmation of demand.
2. Imposition of interest on the reversed Cenvat credit.
3. Imposition of penalties on the appellant company and its Managing Director.
4. Department’s appeal against the dropping of penalties.

Detailed Analysis:

1. Disallowance of Cenvat credit and confirmation of demand:
The appellants, engaged in the manufacture of cold rolling of thick stainless sheets and other related products, received a show cause notice alleging contravention of various provisions under the Central Excise Rules and Cenvat Credit Rules. The adjudicating authority disallowed the Cenvat credit taken on “C.R.S.S. Coil” and confirmed the demand amounting to ?44,43,327/- along with interest and imposed penalties. The Commissioner (Appeals) upheld the confirmation of demand but set aside the penalties. The appellant argued that they had reversed ?11,06,691/- from the Cenvat credit balance during the transition to GST, supported by a Chartered Accountant’s certificate. The Tribunal found that the reversal was done in the books of accounts and thus, the demand to the extent of ?11,06,691/- was set aside.

2. Imposition of interest on the reversed Cenvat credit:
The appellant contended that since the credit was reversed and not utilized, interest should not be levied. They relied on the Tribunal’s previous decision and the Karnataka High Court’s ruling in CCE vs. Bill Forge Pvt Ltd., which stated that interest is only applicable when credit is taken and utilized. The Tribunal agreed, noting that the appellant had sufficient credit balance and thus, no interest was payable.

3. Imposition of penalties on the appellant company and its Managing Director:
The adjudicating authority initially imposed penalties on the appellant company and its Managing Director. However, the Commissioner (Appeals) set aside these penalties. The Tribunal upheld this decision, finding no grounds for the imposition of penalties, especially since the reversal of credit was appropriately accounted for.

4. Department’s appeal against the dropping of penalties:
The department appealed against the dropping of penalties. The Tribunal dismissed the departmental appeal under the National Litigation Policy, referencing the Board’s instruction that guided such decisions.

Conclusion:
The Tribunal set aside the demand to the extent of ?11,06,691/- and ruled that no interest was payable due to the reversal of credit before utilization. The penalties imposed on the appellant company and its Managing Director were also set aside, and the departmental appeal against this decision was dismissed. Both appeals were disposed of accordingly, with the order pronounced in the open court on 04 February 2020.