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2024 (5) TMI 131 - AT - Service TaxDemand of interest on irregular CENVAT Credit merely taken in the books but have not been utilized - entire CENVAT credit of capital goods was availed instead of 50% as stipulated under Rule 4(2)(a) of CCR 2004 - availment of credit on Customs Cess - availment of CENVAT Credit by the appellant on the basis of various invoices / documents is in order or not in terms of Rule 9 of CENVAT Credit Rules 2004 - invocation of extended period of limitation - penalty. Demand of interest on ireegular availed credit - 100% availment of CENVAT Credit on capital goods in the first year itself and the availment of credit on Customs Cess - HELD THAT - The appellant though has taken the credit in their books has not utilized the credit taken towards payment of any duty / tax. Whether interest is demandable or not on irregular CENVAT Credit availed but not utilized the issue is no more res integra as it has been held by various higher judicial fora that when CENVAT Credit was merely taken in the books but not utilized would not involve any payment of interest or penalty. The issue of unutilized CENVAT Credit was a subject matter before the Hon ble Supreme Court in the case of UOI AND ORS. VERSUS IND-SWIFT LABORATORIES LTD. 2011 (2) TMI 6 - SUPREME COURT and the decision was considered by the Hon ble High Courts and co--ordinate Benches of the Tribunal in 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 where it was held that it is only when the assessee had taken the credit in other words by taking such credit if he had not paid the duty which is legally due to the Government the Government would have sustained loss to that extent. Then the liability to pay interest from the date the amount became due arises under Section 11AB in order to compensate the Government which was deprived of the duty on the date it became due. Without the liability to pay duty the liability to pay interest would not arise. The liability to pay interest would arise only when the duty is not paid on the due date. If duty is not payable the liability to pay interest would not arise. In the case of J.K. TYRE INDUSTRIES LTD. VERSUS ASST. COMMR. OF C. EX. MYSORE 2016 (11) TMI 911 - CESTAT BANGALORE - LB Tribunal Large Bench has come to the conclusion that interest liability would not arise when the assessee had merely availed credit and had reversed the same before utilizing the availed credit for remittance of duty. Thus the recovery of interest is not legally justified and not maintainable. Availing CENVAT Credit on ineligible documents contravening the provisions of Rule 9 of the CENVAT Credit Rules 2004 - HELD THAT - The appellant is a Government owned company and it has got different circles operational areas and divisions as such discrediting these documents for the purpose of availment of CENVAT Credit is not legal and proper. Unless there is an allegation that the capital goods are diverted or not installed in the appellant s premises it has to be held that the appellant is eligible for the CENVAT Credit availed. Extended period of limitation - HELD THAT - It is informed that the Show Cause Notice was issued on 30.09.2013 which is well beyond the actual cutoff date for the issue of the Show Cause Notice i.e. 25.04.2011 / 25.10.2011 as the case may be and contended that extended period could not be invokable - reliance placed upon the decision rendered in the case of INDIAN OIL CORPORATION LTD. VERSUS COMMISSIONER OF C. EX. AHMEDABAD 2013 (9) TMI 310 - CESTAT AHMEDABAD wherein it was held that Public Sector Undertaking cannot have mala fide for non-discharge of duty and there cannot be an allegation of intention to evade duty - the demand notice issued is time barred and there is no justification for invoking the extended period of limitation in the facts of this case. Thus the appellant succeeds on limitation also. The demand notice issued is time barred and there is no justification for invoking the extended period of limitation in the facts of this case. Thus the appellant succeeds on limitation also. The impugned order passed by Commissioner of Central Excise and Service Tax cannot sustain and so ordered to be set aside - appeal allowed.
Issues Involved:
1. Whether interest is demandable on irregular CENVAT Credit merely taken in the books but not utilized? 2. Whether the availment of CENVAT Credit by the appellant on the basis of various invoices/documents is in order or not in terms of Rule 9 of CENVAT Credit Rules, 2004? 3. Whether invocation of extended period of time and imposition of penalty are justified considering the facts of this appeal? Summary: Issue 1: Interest on Irregular CENVAT Credit Not Utilized The appellant, M/s. Bharat Sanchar Nigam Limited, contended that although 100% credit was taken, only 50% was utilized during the year, and the balance credit was not utilized till the date of its eligibility. The Tribunal noted that the appellant had not utilized the credit taken towards payment of any duty/tax. It was held that when CENVAT Credit was merely taken in the books but not utilized, it would not involve any payment of interest or penalty. This position was supported by various higher judicial fora, including the Hon'ble High Court of Karnataka in Bill Forge Pvt. Ltd. and the Hon'ble High Court of Madras in Strategic Engg. Pvt. Ltd. Therefore, the recovery of interest was not legally justified and not maintainable. Issue 2: Availment of CENVAT Credit on Ineligible Documents The appellant had availed CENVAT Credit based on invoices raised by the Input Service Distributor and other divisions, arguing that the goods and services were consumed by the appellant. The Tribunal found that the appellant is a Government-owned company with different circles and divisions, and discrediting these documents for the purpose of availment of CENVAT Credit was not legal and proper. Unless there was an allegation that the capital goods were diverted or not installed in the appellant's premises, the appellant was eligible for the CENVAT Credit availed. Issue 3: Invocation of Extended Period and Imposition of Penalty The appellant argued that being a Public Sector Undertaking, there was no deliberate suppression of facts with an intent to evade. It was noted that all details were duly furnished in their ST-3 returns and relevant invoices were made available to the department. The Tribunal relied on decisions such as Indian Oil Corporation Ltd. and Nepa Ltd., which held that a Public Sector Undertaking cannot have mala fide intentions for non-discharge of duty, and there cannot be an allegation of intention to evade duty. Consequently, the demand notice was found to be time-barred, and there was no justification for invoking the extended period of limitation. Conclusion: The impugned Order-in-Original No. 15/2014 dated 05.08.2014 was set aside. The appeal was allowed with consequential reliefs as per the law.
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