2016 (5) TMI 997 - AT - Central Excise

Recovery of interest - excess inadmissible Cenvat Credit inappropriately taken was reversed as soon as issue brought to the notice. Also no interest is payable as Cenvat Credit Rules prevalent at the relevant time never prescribed payment of interest - Held that - it was observed by the department that Appellant has taken credit on Ingot Moulds in the very first year to the extent of 100% when as per Rule-4 of the Cenvat Credit Rules credit was required to be taken in the first year to the extent of 50% of the total credit admissible on capital goods. Appellant paid the excess credit taken but argued that remaining credit of 50% was admissible to them in the next financial year. It is correct that Appellant was eligible to take 50% Cenvat Credit on Ingot Moulds in the next financial year but taking of 100% credit in the very first year was improper in view of the Cenvat Credit Rules. Appellant has utilized credit of ₹ 1,44,669/- in the very first year which was paid on being pointed out by the department. Appellant has, therefore, utilized the amount of ₹ 1,44,669/- from the date of taking Cenvat Credit till it was reversed/paid. This act of utilizing this amount without the authority of law, will attract interest of ₹ 6,759/- as calculated by the Adjudicating Authority. Imposition of penalty - Rule 15(1) of the Cenvat Credit Rules, 2004 - Held that - for violation of the Cenvat Credit Rules and taking excess credit in violation of Cenvat Credit provisions a penalty of ₹ 2000/- imposed upon the Appellant is justified and appropriate. - Decided against the appellant

Summary

Issues: Disallowance of Cenvat Credit, Interest on improperly taken credit, Imposition of penalty

Issue 1: Disallowance of Cenvat Credit
The Appellant filed an Appeal against the Order-in-Appeal disallowing Cenvat Credit of ?1,44,669 along with interest and upholding the penalty imposed. The Consultant for the Appellant argued that the Appellant is not contesting the admissibility of Cenvat Credit on merit. It was contended that the Cenvat Credit on Ingot Moulds to the extent of 100% in the first year was not admissible under the Cenvat Credit Rules, 2001, but was admissible in the next financial year. The excess credit taken was reversed as soon as the issue was brought to their notice. The Consultant further argued that no interest is payable as the Cenvat Credit Rules at the relevant time did not prescribe payment of interest. Regarding the penalty, it was contended that since the entire inadmissible Cenvat Credit was reversed, the penalty imposed was not justified. The Appellant relied on case laws to support their arguments.

Issue 2: Interest on Improperly Taken Credit
The Revenue argued that interest on improperly taken credit is chargeable from the date of taking excess credit to the date of payment, as quantified in the adjudication order. It was contended that the penalty imposed on the Appellant was justified because the credit on Ingot Moulds should have been restricted to 50% of the total credit in the first year, as per the Cenvat Credit Rules. The Revenue relied on a case law to support their argument.

Issue 3: Imposition of Penalty
After hearing both sides and examining the case records, it was found that the Appellant had taken credit on Ingot Moulds to the extent of 100% in the first year, contrary to the requirement of the Cenvat Credit Rules. The Appellant utilized the excess credit amount and paid it only when pointed out by the department. The Appellant was eligible to take 50% Cenvat Credit on Ingot Moulds in the next financial year. The Appellant was held liable to pay interest on the amount utilized improperly. A penalty of ?2,000 was imposed on the Appellant under Rule 15(1) of the Cenvat Credit Rules, 2004. The imposition of the penalty was deemed justified and appropriate for the violation of the Cenvat Credit Rules.

In conclusion, the Appellant's Appeal regarding the payment of interest and imposition of penalty was dismissed based on the observations made, and the operative portion of the order was pronounced in the open court by the Member (Technical) of the Appellate Tribunal CESTAT Kolkata.