2021 (12) TMI 428 - AT - Service Tax

Demand of credit - reversal of availability of excess credit irregularly on the capital goods - extended period of limitation - HELD THAT - The Ld.AR relied on decision of Hon ble Supreme Court in the case of UOI AND ORS. VERSUS IND-SWIFT LABORATORIES LTD. 2011 (2) TMI 6 - SUPREME COURT to say that they are liable to pay interest. That issue was examined by the Hon ble 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 in which case the Hon ble High Court has examined the issue and held that although the credit taken but the same remained unutilized, in that circumstance, no interest is payable. But the said issue has been considered in the case of THE COMMISSIONER OF CENTRAL EXCISE VERSUS M/S. SUNDARAM FASTENERS LIMITED 2014 (2) TMI 551 - MADRAS HIGH COURT to say that the interest is payable. As there are contradictory decisions of the Hon ble High Courts after the decision of Hon ble Apex Court. In that circumstance, the issue is to be decided by this Tribunal independently. This Tribunal in the case GTL INFRASTRUCTURE LTD. VERSUS COMMISSIONER OF SERVICE TAX, MUMBAI 2014 (9) TMI 647 - CESTAT MUMBAI has taken a view that in case where the credit is taken earlier has been reversed without utilizing the same, in that circumstance, no interest is payable. Therefore, in view of the decision of this Tribunal, it is held that the appellant is not liable to pay interest. Although the appellant has paid interest, he has made request for dropping proceedings initiated by show cause notice. The facts of the case of Sundaram Fasteners is not applicable to the facts of this case - no interest is paybale and no penalty can be imposed on the appellant. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeal against confirmed demand of interest and penalty due to irregular credit utilization and reversal.

Analysis:
The appellant, a service provider, appealed against an order confirming the demand of interest and penalty due to irregular credit utilization on capital goods procured between October 2008 and September 2009. An audit in March 2010 revealed excess credit taken irregularly, which was subsequently reversed by the appellant on 31.3.2010 without paying interest. Despite requests for interest payment, the appellant did not comply, leading to a show cause notice in December 2012 invoking the extended period of limitation. The matter was adjudicated, confirming the interest demand and imposing a penalty. The appellant argued that since the credit remained unutilized and was reversed promptly upon audit detection, no interest or penalty should be imposed, citing the decision in GTL Infrastructure Limited vs. CST, Mumbai. The appellant also contended that the show cause notice was time-barred due to the audit in March 2010.

The Authorized Representative (AR) opposed, referring to the decisions in Ind-Swift Laboratories and Sundaram Fasteners Limited to assert the liability for interest payment even on unutilized credit. The AR highlighted the appellant's admission of interest liability post-hearing and cited the case of Subhash Chand Surana vs. CCE, Indore in support. The Tribunal noted the undisputed audit date of March 2010 and the subsequent issuance of the show cause notice in December 2012, raising the issue of interest liability on reversed but unutilized credit as the primary concern. The AR's reliance on conflicting High Court decisions post the Supreme Court's ruling in Ind-Swift Laboratories led to an independent evaluation by the Tribunal.

The Tribunal referenced the decision in GTL Infrastructure Limited, which held that no interest is payable when credit taken earlier is reversed without utilization. Consequently, the Tribunal ruled in favor of the appellant, absolving them of interest payment. Addressing the AR's argument regarding the appellant's admission of interest liability in a letter dated 1.10.2015, the Tribunal clarified that the circumstances of the Sundaram Fasteners case were not applicable to the current matter. As a result, the impugned order was set aside, and the appeal was allowed with any consequential relief.