2016 (2) TMI 109 - AT - Central Excise

Recovery of interest - Inadmissible cenvat credit on basic customs duty instead of CVD - entire amount of cenvat credit was later voluntarily reversed much before issuance of the show cause notice - Held that - Undisputedly, the appellant had reversed the cenvat credit, before issuance of the demand notice. Also, it is not in dispute that demand notice was issued three years after reversal of the credit. The Ld. Commissioner (Appeals) has dropped the penalty imposed under section 11AC of CEA, 1944 by the adjudicating authority observing that there was no misdeclaration, suppression of facts etc. with intention to evade payment of duty. This findings of the Ld. Commissioner (Appeals) has not been challenged by the revenue. In this premises, it is not difficult to infer that there has been no suppression, misdeclaration etc. by the appellant. Consequently the show cause notice issued for recovery of interest issued after three years, was barred by limitation in view of the judgement of the Hon ble Delhi High Court in Hindustan Insecticides Ltd. case (2013 (8) TMI 225 - DELHI HIGH COURT ). - Decided in favour of assessee

Summary

Issues:
Appeal against Order-in-Appeal concerning inadmissible cenvat credit on basic customs duty, imposition of penalty, recovery of interest, limitation period for recovery of interest.

Analysis:
The appeal was filed against Order-in-Appeal No. 04/HAL/2012 passed by the Commissioner of Central Excise (Appeals), Kolkata. The appellant had availed inadmissible cenvat credit on basic customs duty instead of CVD amounting to Rs. 44,01,967.73 during August 2005 to March 2007. The entire amount of cenvat credit was voluntarily reversed by the appellant before the issuance of the show cause notice. The show cause notice was issued three years after the reversal of the credit, proposing penalty and interest recovery. The Ld. Commissioner (Appeals) set aside the penalty but upheld the recovery of interest under Section 11AB of the Central Excise Act, 1944.

The appellant contended that the demand for interest, in the absence of suppression of fact or misdeclaration, was barred by limitation, citing a judgment of the Hon'ble Delhi High Court. The appellant argued that the demand notice issued after three years was beyond a reasonable period and was thus barred by limitation. The Ld. Commissioner (Appeals) dropped the penalty imposed by the adjudicating authority due to the absence of misdeclaration or suppression of facts. The Revenue did not challenge this finding. The Tribunal noted that there was no suppression or misdeclaration by the appellant, and the show cause notice for recovery of interest issued after three years was indeed barred by limitation.

Citing the judgment of the Hon'ble Delhi High Court in a specific case, the Tribunal concluded that the appellant was entitled to succeed in the appeal. The Tribunal held that the interest under Section 11AB of the Central Excise Act, 1944 was not recoverable from the appellant due to the limitation period. Consequently, the Commissioner (Appeals) order confirming the recovery of interest was set aside, and the appeal was allowed.