2016 (11) TMI 185 - AT - Central Excise

Reversal of irregular credit - Interest and penalty for taking the Cenvat credit wrongly - Before the credit was taken or utilized, the mistake was brought to its notice. The assessee accepted the mistake and immediately reversed the entry - Held that - the issue is no more res intera and is settled in favour of the appellant by a decision of the Hon ble Karnataka High Court in the case of CCE &ST., LTU, Bangalore Vs. Bill Forge Pvt. Ltd. 2011 (4) TMI 969 - KARNATAKA HIGH COURT where it was held that interest and penalty is not imposable where credit wrongly availed has been reversed prior to utilization. The appellant had merely availed the credit and reversed the same before utilizing the availed credit for remittance of duty, interest liability would not arise - no interest is demandable from the appellant and no penalty can be imposed - appeal allowed - decided in favor of appellant.

Summary

Issues:
Demand of interest under Cenvat Credit Rules, 2004 and Central Excise Act, imposition of penalty under Cenvat Credit Rules 2004.

Analysis:
The appeal was against the Commissioner's order confirming a demand of interest and imposing a penalty on the appellant for taking excess credit. The appellant, a Public Sector Undertaking, had availed excess credit during a specific period. The audit party identified this irregularity, leading to the demand for interest and penalty. The issue revolved around the demand for interest and penalty under Rule 14 and Rule 15(1) of the Cenvat Credit Rules, 2004, respectively, read with relevant provisions of the Central Excise Act.

The Judicial Member noted that the issue in this case had been settled in favor of the appellant by previous decisions. Citing judgments like CCE & ST., LTU, Bangalore Vs. Bill Forge Pvt. Ltd. and CCE Madurai Vs. Strategic Engineering (P) Ltd., it was established that interest and penalty are not applicable if wrongly availed credit is reversed before utilization. The appellant's counsel referenced a previous decision by the Tribunal in the appellant's own case, aligning with the principles established in the aforementioned cases. The Larger Bench of the Tribunal had also ruled in the case of JK Tyre & Industries Ltd. that the decision of the Karnataka High Court in Bill Forge Pvt. Ltd. governed such matters. As the appellant had reversed the credit before using it for duty remittance, no interest liability should arise.

Considering the precedents and the decisions of higher authorities, the Judicial Member set aside the Commissioner's order, ruling that no interest was demandable from the appellant and no penalty could be imposed. The appeal was allowed, providing consequential relief if necessary. The judgment was pronounced in open court, bringing the matter to a close.