2013 (11) TMI 782 - AT - Central Excise

Accrual Date of Interest Liability - Whether liability of interest under Rule 14 of Cenvat Credit Rules, 2004 read with Section 11AB arises from the date of taking wrong credit in books of accounts or when such credit is taken (utilized) while clearing the finished products The assessee has taken the input service credit on 12.01.2009 against an invoice - They again took the credit of the said amount against the same invoice on 16.01.2009 - They however, reversed the excess credit on 13.01.2009 i.e. after a period of about 11 months from the date of taking the wrong credit - Held that -Following Union of India Vs. Ind-Swift Laboratories Ltd. 2011 (2) TMI 6 - Supreme Court - The manufacturer of the provider of the output service becomes liable to pay interest along with the duty where CENVAT credit has been taken or utilized wrongly or has been erroneously refunded and the provision of Section 11AB would apply for effecting such recovery - The word OR found in Rule 14 cannot be read as AND . The assessee s contention that they did not utilize this credit towards payment of duty cannot be accepted when there were clearances of final products and duty has been debited from the credit account cannot be accepted - during the period, the liability to pay duty/service tax would have arisen any number of times, in fact every month Interest on irregular credit would arise from the date on which credit was wrongly taken irrespective of the fact whether the credit was utilised or not - thus, the Appellant is liable to pay interest from date of taking the wrong credit Decided against Assessee.

Summary

Issues Involved:
1. Liability of interest under Rule 14 of Cenvat Credit Rules, 2004 read with Section 11AB.
2. Interpretation of the rule in cases of wrongly taken or utilized credit.
3. Application of judgments supporting non-liability for interest in certain scenarios.
4. Binding nature of Supreme Court judgments on appellate authorities.

Analysis:
1. The appeal was filed against the Order-in-Appeal for demand of interest under Rule 14 of Cenvat Credit Rules, 2004. The appellant inadvertently took double credit against the same invoice but voluntarily reversed the excess amount. The issue was whether interest liability arises from the date of taking wrong credit or when credit is utilized.

2. Rule 14 of Cenvat Credit Rules, 2004 states that recovery of wrongly taken credit along with interest shall be made. The Supreme Court in the Ind-Swift Laboratories case clarified that interest arises when credit is wrongly taken, regardless of utilization. The court emphasized that the word 'OR' in the rule cannot be read as 'AND', establishing liability upon taking or utilizing credit improperly.

3. The appellant cited judgments where non-utilization of wrongly taken credit absolved the assessee from interest payment. However, the tribunal distinguished those cases as the appellant in this case took the credit twice against the same invoice and reversed it after a considerable period, leading to clearances of final products with debited duty. The tribunal found the facts distinguishable from the cases cited by the appellant.

4. The Revenue contended that the Supreme Court's decision in the Ind-Swift Laboratories case binds appellate authorities, requiring payment of interest from the date of irregular credit. The tribunal concurred with this view, upholding the order passed by the Commissioner (Appeals) and rejecting the appeal. The liability for interest was affirmed to arise from the date of taking the wrong credit, as per the Supreme Court's interpretation of the rule.

In conclusion, the tribunal upheld the demand for interest under Rule 14 of Cenvat Credit Rules, 2004, from the date of wrongly taking credit, emphasizing the binding nature of Supreme Court judgments on appellate authorities in determining interest liabilities.