2016 (8) TMI 981 - AT - Central Excise

Recovery of interest - non payment/delayed payment of duty - Section 11AB of the Central Excise Act, 1944 - reversed cenvat credit voluntarily on POY lying which were received with out reversal of credit - irregular availment of CENVAT credit and non payment of duty - Held that - the ld. Commissioner has categorically recorded that all these payments/ reversal of credit by unit 1, Unit 2 and Unit 3 of the Appellant were made after admitting to the contravention of Rule 3(5) of Cenvat Credit Rules, 2004 as the POY cleared by them, was not covered under the purview of job work Notification No. 214/86-CE dated 25.03.1986. Hence, as the appellant has paid the duty/credit amount voluntarily and the same was appropriated in the impugned order then why interest on the same would not be chargeable. In the result, we agree with the Revenue that direction for recovery of interest in the said Para 8(viii) of the impugned order is valid and correct in law. - Appeal disposed of by way of remand

Summary

Issues:
- Alleged irregular availment of CENVAT credit and non-payment of duty
- Appellant's challenge regarding payment of interest on non-payment/delayed payment of duty
- Interpretation of Rule 3(5) of Cenvat Credit Rules, 2004
- Validity of direction for recovery of interest in the impugned order

Issue 1: Alleged irregular availment of CENVAT credit and non-payment of duty

The case involved investigations at the premises of three units of the appellant where cenvat credit reversal was voluntarily done on POY received without credit reversal under Rule 3(5) of the Cenvat Credit Rules, 2004. A show cause notice was issued, leading to confirmation of demand, penalty imposition, and interest recovery direction by the adjudicating authority. The Tribunal remanded the matter for fresh hearing due to improper appellant representation. Upon fresh adjudication, the demand was partially confirmed. The appellant challenged the interest payment directive under Section 11AB of the Central Excise Act, 1944, focusing on Clause (viii) of Para 8 of the order.

Issue 2: Appellant's challenge regarding payment of interest on non-payment/delayed payment of duty

The appellant argued against the interest payment, contending that no interest was payable on the amount already paid by them. They claimed that the demand for credit reversal under Rule 3(5) of Cenvat Credit Rules, 2004 was incorrect as following Rule 4(5)(a) would have obviated the need for duty payment or credit reversal when sending inputs for job work processing. The appellant's advocate acknowledged that interest quantification was absent but asserted no interest was due on the amount already paid.

Issue 3: Interpretation of Rule 3(5) of Cenvat Credit Rules, 2004

The Revenue representative argued that the reversal of credit by the units was justified as per Rule 3(5) since the units admitted to the violation and voluntarily reversed the credit. The Commissioner found the clearances of POY without credit reversal under Rule 3(5) to be incorrect, supported by the statements of the units' authorized representatives. The Commissioner held that the liability for interest automatically followed the credit reversal under the statute, emphasizing that the reversal was admitted by the units' personnel in charge.

Issue 4: Validity of direction for recovery of interest in the impugned order

The Tribunal concurred with the Revenue's position, noting that the units' payments/reversals were made after admitting the Rule 3(5) contravention. The Tribunal agreed that interest was chargeable since the duty/credit amount was paid voluntarily and appropriated in the order. Consequently, the appeal was disposed of by remanding the matter for interest quantification, affirming the validity of the interest recovery direction in the impugned order.

This detailed analysis of the judgment from the Appellate Tribunal CESTAT AHMEDABAD reflects the complex legal issues surrounding the alleged irregular availment of CENVAT credit, interest payment disputes, Rule interpretations, and the validity of the interest recovery directive.