2016 (6) TMI 582 - AT - Service Tax

Demand of interest - availment of ineligible credit of service tax on reverse charge basis - later on reversed without utilizing the same - Held that - the interest is not payable as there has been only an availment and no utilization. It is well settled that when there has been only availment and no utilization and when there is no loss to the Revenue, the question of demand of interest does not arise. The contention of the Revenue that UOI and Ors. Vs Ind-Swift Laboratories Ltd. case 2011 (2) TMI 6 - Supreme Court covers the situation on hand cannot be accepted as this Tribunal in the case of T.V.Sundram Iyengar & Sons Ltd. Vs CCE Madurai 2015 (10) TMI 1256 - CESTAT CHENNAI , has already held that while deciding the Ind-Swift Laboratories case the previous decision of the Supreme Court in the case of Bombay Dyeing was not brought to the notice of the Apex Court. Therefore, the contention of the Revenue on this count is unsustainable. Accordingly the impugned order is set aside. - Decided in favour of appellant

Summary

Issues:
- Availment of cenvat credit on reverse charge basis for Online Information Service
- Demand of interest for availing ineligible credit without utilization
- Interpretation of Rule 14 of the CCR regarding payment of interest
- Applicability of previous rulings on non-utilization of cenvat credit

Availment of Cenvat Credit:
M/s. Komatsu India Private Ltd. availed cenvat credit for Online Information Service on reverse charge basis. The department noticed this and directed the appellant to reverse the wrongly availed credit related to trading activity. A show cause notice was issued, demanding interest for the availed but not utilized credit. The appellant argued that since they did not utilize the credit, no loss to the revenue occurred. The Commissioner (Appeals) upheld the demand for interest, leading to the appeal.

Demand of Interest:
The appellant contended that as per Rule 14 of the CCR, mere wrong availment without utilization should not result in interest payment if there is no loss to the exchequer. The Commissioner (Appeals) disagreed, stating that interest is payable even if the credit was not utilized but paid voluntarily. The appellant cited previous rulings to support their argument, emphasizing that non-utilization should exempt them from interest payment.

Interpretation of Rule 14 of the CCR:
The appellant argued that the credit was availed but not utilized, and it was reversed promptly. The department claimed that the credit was utilized after a significant gap, and there is no time limit for demanding interest. The Commissioner (Appeals) relied on a Supreme Court decision to support the demand for interest, emphasizing utilization over mere availment. The appellant's reliance on the previous rulings and Rule 14 interpretation formed a critical part of the argument.

Applicability of Previous Rulings:
The appellant cited specific rulings to support their stance that interest should not be payable for non-utilized cenvat credit. The Tribunal analyzed these rulings, emphasizing that non-utilization, when proven, should exempt the appellant from interest payment. The Tribunal differentiated the present case from previous judgments, highlighting the importance of utilization in determining interest liability. Ultimately, the Tribunal set aside the impugned order, ruling in favor of the appellant based on the distinction between availment and utilization of credit.