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2020 (3) TMI 320 - AT - Service TaxDemand of Interest and penalty - availment of CENVAT credit that stood, either adjusted or reversed, before completion of the adjudication process - proper consideration of issues not made - HELD THAT - It appears from the submissions, and from a perusal of the impugned order, that the contentions of the appellant have not been examined by the adjudicating authority. This is grievous remiss that can be rectified only in fresh proceedings. In the dispute before us, the reversal of credit before issue of show cause notice renders the taking of credit to have been erased ab initio. There is not even a whiff of allegation that the credit reversed had been utilized, or could have been utilized, to the detriment of the exchequer. The renunciation of jurisdiction to adjudicate upon the claim for exclusion from interest liability does not appear to have been sanctioned by the decision of the Hon ble Supreme Court. From a perusal of rule 14 of CENVAT Credit Rules, 2004 and, in particular, of the disjunctive collation of taken , utilized and erroneously refunded with the expression wrongly qualifying, not all three but only two of these, it would appear that the assumption of credit and a refund of credit, if wrong, would have to pay the price in the form of interest. However, it is unusual for utilization to be qualified with ineligibility on its own as utilization is solely for the purpose of discharge of tax/duty liability which, even if not warranted, does not, by any stretch of usage, behove description as wrongly. Such transfer of epithet, borne out of drafting frailty, can only reasonably mean utilization after having been wrongly taken and, therefore, ineligible. The appeal is allowed by way of remand to determine the interest liability, as well as the penal consequences, in the light of the submissions that were not considered by the adjudicating authority in the impugned order.
Issues Involved:
1. Liability to pay interest on CENVAT credit. 2. Imposition of penalty for wrongful availment of CENVAT credit. 3. Upfront availment of duty paid on capital goods. 4. Availment of credit of tax on input services and duties on capital goods before usage charges were taxable. 5. Multiple availment of CENVAT credit against the same document. 6. Availment of CENVAT credit against debit notes issued by divisions and branches. Detailed Analysis: 1. Liability to Pay Interest on CENVAT Credit: The core dispute revolves around the liability to pay interest on CENVAT credit that was either adjusted or reversed before the adjudication process was completed. The appellant argued that the bar of limitation on recovery should also apply to interest liability under Section 75 of the Finance Act, 1994. They cited the Supreme Court's decision in TVS Whirlpool Ltd. v. Commissioner of Customs, Madras, and the Delhi High Court's decision in Kwality Ice Cream Company v. Union of India, which support the contention that the period of limitation for the principal amount should also apply to the interest claim. 2. Imposition of Penalty for Wrongful Availment of CENVAT Credit: The adjudicating authority imposed penalties for wrongful availment of CENVAT credit. The appellant argued that the reversal of such credit and the availability of credit for carrying forward the ineligible amount indicate that the extended period under Section 11A of the Central Excise Act, 1944, should not have been invoked. 3. Upfront Availment of Duty Paid on Capital Goods: The appellant claimed that the upfront availment of duty paid on capital goods, instead of bifurcating over the first and second years, was declared in the returns. They argued that this should not attract interest liability, citing decisions such as Shah Yarn Tex (P) Ltd. v. Commissioner (Appeals), Coimbatore, and Oil and Natural Gas Corporation Limited v. Commissioner of Central Excise and Service Tax, Surat, which held that interest is not payable if sufficient balance was available in the CENVAT Credit Account. 4. Availment of Credit of Tax on Input Services and Duties on Capital Goods: The appellant contended that CENVAT credit on capital goods procured when interconnection usage charge was not liable to tax should not be denied. They argued that the subsequent incorporation of telecommunication service and its utilization by other divisions for providing service to subscribers should ensure eligibility for CENVAT credit. They relied on the Karnataka High Court's decision in Commissioner of Central Excise, Bangalore v. Kailash Auto Builders Ltd. and the Madras High Court's decision in Kaleesuwari Refinery Pvt Ltd. v. CESTAT, Chennai. 5. Multiple Availment of CENVAT Credit Against the Same Document: The appellant admitted to the erroneous multiple availment of CENVAT credit and had reversed the credit along with interest. They argued that the penalty imposed was unwarranted, citing the Tribunal's decision in Vodafone Mobile Services Ltd. v. Commissioner, Service Tax Commissionerate, Pune, which provided immunity under Section 73(3) when service tax along with interest is paid voluntarily. 6. Availment of CENVAT Credit Against Debit Notes Issued by Divisions and Branches: The appellant contended that the reversal of credit and the eligibility for all inflows and outflows of the corporate enterprise were overlooked by the adjudicating authority. They relied on decisions such as Commissioner of Central Excise, Pune-III v. Ajinkya Enterprises and Commissioner of Central Excise v. Rane NSK Steering Systems Ltd., which supported the view that once duty on final products is accepted by the Department, CENVAT credit availed need not be reversed. Conclusion: The Tribunal noted that the appellant's contentions were not adequately examined by the adjudicating authority, representing a significant oversight. The Tribunal decided to remand the case for fresh proceedings to determine the interest liability and penal consequences, considering the appellant's submissions that were previously ignored. The Tribunal also emphasized the need to consider the limits of applicability of various judicial decisions cited by both parties.
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