2016 (11) TMI 54 - AT - Central Excise

Reversal of CENVAT credit - whether interest is liable on the cenvat credit which was reversed and whether the appellant is liable to penalty under Rule 15(1) of the Cenvat Credit rules, 2004? - Held that - the unit had not commenced production when the investigation started and hence there was no clearance from the factory. As there was no clearance from the factory, there was no question of utilization of the cenvat credit availed by the party - reliance placed on the decision of the case GTL Infrastructure Ltd. Vs. CCE 2014 (9) TMI 647 - CESTAT MUMBAI where it was held that the appellants are not liable to pay interest for wrongful availment of Cenvat Credit which has been reversed before utilization by the appellant - the demand of interest in this case is not proper and justified. Levy of penalty - reliance placed in the decision of CCE Madurai Vs. M/s Strategic Engineering (P) Ltd. 2014 (11) TMI 89 - MADRAS HIGH COURT where it was held that mere taken of CENVAT credit facilities is not at all sufficient for claiming of interest as well as penalty - the appellants are not liable to penalty. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Liability of interest on reversed cenvat credit.
2. Liability of penalty under Rule 15(1) of the Cenvat Credit rules, 2004.

Analysis:
1. The appeal challenged the order dated 30.11.2011 passed by the Commissioner of Central Excise (Appeals), Pune-II regarding the admissibility of cenvat credit on imported goods and structural items. The dispute centered around the liability of interest on the reversed cenvat credit. The appellant argued that as production had not commenced, and no clearance or utilization of the credit occurred before reversal, there was no loss to the Revenue. The appellant relied on specific case laws to support their stance, emphasizing the distinction from cases involving fake invoices. The Tribunal noted that the unit had not started production during the investigation, aligning with the appellant's claim. Citing precedent, the Tribunal ruled that interest demand was unjustified in the absence of credit utilization, as seen in the case of GTL Infrastructure Ltd. vs. CCE.

2. The second issue pertained to the penalty under Rule 15(1) of the Cenvat Credit rules, 2004. The Revenue contended that the responsibility to take admissible credit rested with the party, referencing relevant legal provisions and judicial decisions. The Revenue highlighted that intent to evade was not a prerequisite for contravention under Rule 15(1). In contrast, the appellant argued against penalty imposition, drawing support from the Hon'ble Madras High Court's judgment in CCE Madurai vs. M/s Strategic Engineering (P) Ltd. The Tribunal, in line with the Madras High Court's ruling, concluded that the appellant was not liable for penalty in this case. Therefore, the order of the Commissioner (Appeals) was set aside, and the appeal was allowed.

In summary, the Tribunal found in favor of the appellant, ruling against the imposition of interest on reversed cenvat credit and penalty under Rule 15(1) of the Cenvat Credit rules, 2004, based on the specific circumstances and legal precedents cited during the proceedings.