2015 (12) TMI 879 - AT - Service Tax

Demand on interest on reversal of CENVAT Credit - credit was availed but not utilized - Held that - Appellant has placed the Cenvat Credit Register during the relevant period before me and it was clear that when credit was taken from February 2008 up to July 2009, balance has not come down below the figure of ₹ 33,15,661, the disputed amount. In July 2009, this amount has been reversed. Further, in reply to the show-cause notice, the appellants have clearly stated that they have taken credit but never utilized during the entire period and it was available in the Books of Account and there is no contra finding. - Since the issue is covered by decision of the Hon ble High Court of Madras 2014 (11) TMI 89 - MADRAS HIGH COURT , respectfully following the same, it is held that the appellant is not liable to pay interest and penalty - Decided in favour of assessee.

Summary

Issues: Cenvat credit availed irregularly, interest and penalty imposed, challenge on interest and penalty imposition.

In this case, the Appellate Tribunal CESTAT Bangalore considered the challenge raised by the appellants against the demand for Cenvat credit of Rs. 33,15,661/- availed irregularly during February 2009 to March 2009, along with interest and penalty imposed. The appellants did not dispute the inadmissibility of the credit but contended that interest and penalty should not be applicable since the credit was never utilized and was reversed by the department in July 2009. The tribunal heard arguments from both sides. The appellant's counsel relied on a decision of the Hon'ble High Court of Madras to support their claim that interest and penalty should not be imposed when credit is not utilized. The Revenue argued that the claim of non-utilization was not considered by lower authorities and required verification. The tribunal examined the Cenvat Credit Register provided by the appellant, which showed that the disputed amount remained unutilized and was subsequently reversed in July 2009. The appellants confirmed in their reply that the credit was never utilized and was available in their Books of Account.

The tribunal referenced the case of CCE vs. Strategic Engineering (P) Ltd., where the Hon'ble High Court of Madras clarified that the mere taking of credit does not automatically lead to the imposition of interest and penalty, especially in light of subsequent amendments to the rules requiring credit to be both taken and utilized. The tribunal, in line with the Madras High Court decision, held that the appellants were not liable to pay interest and penalty. Consequently, the appeal was allowed in favor of the appellants, with any consequential relief to be granted accordingly.