2022 (10) TMI 189 - AT - Central Excise

Refund of Interest (paid) on reversal of CENVAT Credit - quantification of interest amount - whether the balance of service tax credit should be taken for requantifying the interest or the total credit should be taken? - Rule 3 of Cenvat Credit Rules 2004 - HELD THAT - The credit of all the three account is taken i.e. input inputs service and capital goods the credit balance was maintained much more than the credit reversed by the appellant on which the interest was paid. It is found that under Cenvat Credit Rules 2004 in terms of Rule 3 all the credits such as credit of input input service and capital goods is under one pool and no credit can be reversed on that credit. Therefore the adjudicating authority has erred in only considering the credit balance of service tax. The total credit of input input service and capital goods should be taken to ascertain the unutilized cenvat credit. If the consolidated cenvat credit balance has been maintained more than the cenvat credit reversed in such case the appellant is not liable to interest post 17.3.2012 accordingly the claim of the appellant appears to be legal and correct however the same has to be re-quantified considering the total credit of input input service and capital goods. The matter is remanded to the adjudicating authority to re-quantify the interest and sanction the same to the appellant - appeal allowed by way of remand.

Summary

Issues:
Refund claim rejection based on interest calculation post-amendment to Rule 14 of Cenvat Credit Rules, 2004 - Dispute over the consideration of total credit or only service tax credit for re-quantifying interest - Appellant's appeal against rejection of refund claim.

Analysis:
The case involved a refund claim rejection concerning interest calculation post-amendment to Rule 14 of Cenvat Credit Rules, 2004. The appellant had reversed inadmissible cenvat credit and paid interest. Subsequently, based on Notification No.18/2012-CE (NT) dated 17.3.2012 amending Rule 14, the appellant sought a refund of interest amounting to Rs.3,51,442 for the period after 17.3.2012. The claim was initially rejected, leading to an appeal. The Tribunal had previously remanded the matter for re-quantification of interest post 17.3.2012, resulting in a revised claim of Rs.2,86,180. However, the Adjudicating Authority only considered the remaining service tax credit for re-quantification, leading to rejection of a significant portion of the claim.

In the appeal, the consultant for the appellant argued that all credits under Rule 3 of Cenvat Credit Rules, 2004 should be considered for re-quantifying interest, not just the service tax credit. It was contended that as the total credit exceeded the reversed credit, no interest should be payable post 17.3.2012. On the other hand, the revenue representative supported the Adjudicating Authority's decision.

The Tribunal, after reviewing the submissions and records, noted its previous order allowing the refund of interest on credit reversed after 17.3.2012. The key issue was whether the Adjudicating Authority erred in considering only the service tax credit balance for re-quantifying interest. The Tribunal emphasized that all credits, including input, input service, and capital goods, form a single pool under Rule 3, and no credit can be reversed individually. Therefore, the Authority's decision to consider only the service tax credit balance was deemed incorrect. The Tribunal held that the total credit balance should be assessed to determine unutilized cenvat credit. If the consolidated credit balance exceeded the reversed credit, no interest would be payable post 17.3.2012.

Consequently, the Tribunal set aside the impugned order, remanding the matter to the Adjudicating Authority for re-quantifying interest based on the total credit of input, input service, and capital goods. The Authority was directed to issue a denovo order within three months from the date of the Tribunal's order.