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2021 (9) TMI 294 - AT - Central ExciseLevy of interest - Cenvat credit availed on the contribution of service charges collected from employees, which is not Cenvatable - Outdoor Catering Services - levy of penalty - Rule 14 of Cenvat Credit Rules, 2004 - HELD THAT - The issue of availment of Cenvat credit on employees contribution in respect of Outdoor Catering Services was debatable and the issue has been finally settled in the case of CCE, NAGPUR VERSUS ULTRATECH CEMENT LTD., 2010 (10) TMI 13 - BOMBAY HIGH COURT by the Hon ble Bombay High Court. Therefore, in this backdrop of the issue the malafide intention cannot be attributed to the appellant. Therefore, the penalty imposed by the Lower Authority is not sustainable hence, penalty is set aside. Interest on availment of Cenvat credit - HELD THAT - It has been settled that the credit on Outdoor Catering Service to the extent of contribution of services charges borne by the employee is not Cenvatable. Therefore, the credit taken by the appellant is wrongly taken credit. Therefore, in terms of Rule 14 of CCR, 2004 interest is chargeable. In the Rule it is clearly provided that whether the credit is taken or utilized the interest will be chargeable. In the present case even if the credit was not utilized but taken wrongly therefore, the interest is chargeable from the date of taking credit till the date of reversal, if any made - the appellant is liable to pay interest. The penalties imposed upon the appellants are set aside and demand of interest is maintained - Appeal allowed in part.
Issues involved:
Whether the appellant is liable to pay interest on Cenvat credit availed on service charges collected from employees for Outdoor Catering Services and whether the appellant is liable to penalty. Analysis: The appellant contended that the Cenvat credit was availed under a bonafide belief and subsequently reversed, arguing that interest and penalty should not be charged as the credit was not wrongly taken. The appellant cited various judgments in support of this argument. On the contrary, the revenue representative emphasized that interest on Cenvat credit had been settled by the Supreme Court in a previous case, making the cited judgments by the appellant's counsel distinguishable. The revenue representative also presented several judgments to support their stance. The tribunal carefully considered both arguments and examined the issue of Cenvat credit availed on Outdoor Catering Services where a portion of the service charges was contributed by employees, which was deemed non-Cenvatable. The tribunal noted that this issue had been conclusively settled by the Bombay High Court in a previous case. Consequently, the tribunal found no malafide intention on the part of the appellant and set aside the penalty imposed. Regarding the levy of interest on the Cenvat credit, the tribunal determined that since the credit on service charges borne by employees was non-Cenvatable, the credit taken by the appellant was considered wrongly taken. Referring to Rule 14 of the Cenvat Credit Rules, 2004, the tribunal held that interest was chargeable from the date of taking credit until any reversal was made. Despite conflicting judgments cited by both parties, the tribunal relied on a Supreme Court judgment which interpreted Rule 14 to mandate interest in cases of both credit taken and utilized. The tribunal emphasized the binding nature of the Supreme Court's decision over lower court judgments, concluding that the appellant was indeed liable to pay interest. In the final decision, the tribunal set aside the penalties imposed on the appellant but upheld the demand for interest. The appeals were partly allowed, with the judgment pronounced on 03.09.2021.
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