2016 (11) TMI 512 - AT - Central Excise

Interest and penalty for taking the Cenvat credit wrongly - whether mere wrong availment of CENVAT credit without utilisation of the same would attract interest and penalty? - Held that - reliance placed on the decision of the case of Commissioner of Central Excise & ST, LTU, Bangalore vs. Bill Forge Pvt. Ltd. 2011 (4) TMI 969 - KARNATAKA HIGH COURT where it was held that The liability to pay interest would arise only when the duty is not paid on the due date. If duty is not payable, the liability to pay interest would not arise. The reversal of CENVAT credit wrongly availed and reversed before utilisation amounts to non-availment of CENVAT credit and hence interest and penalty not payable under Rule 15(1) of CCR, 2004 - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Wrong availment of CENVAT credit leading to interest and penalty imposition.

Analysis:
The appellant, engaged in manufacturing electronic products, availed CENVAT credit twice on the same invoice and on the same bill of entry, resulting in excess credit amounting to ?7,10,012 and ?9,95,062 respectively. The appellant voluntarily reversed the irregular credit upon discovery during an audit, leading to a demand for interest of ?1,76,023. The appellant contested the demand, arguing that interest and penalty should not apply when wrongly availed credit is voluntarily reversed. The adjudicating authority upheld the demand, prompting the appellant to appeal to the Commissioner of Central Excise, who rejected the appeal. The appellant then filed an appeal challenging the decision.

2. Legal Arguments:
The appellant contended that the impugned order ignored legal provisions and failed to consider precedents on similar issues, thus should be set aside. They argued that the inadvertent mistake in availing the credit without any intention to evade duty should not attract interest and penalty. The appellant highlighted that the reversal of wrongly availed credit before utilization should be considered as non-availment, hence interest and penalty under Rule 15(1) of CCR, 2004 should not apply. The appellant cited relevant case laws to support their argument.

3. Counter-Arguments:
The respondent, however, supported the findings in the impugned order, citing the Supreme Court judgment in UOI vs. Indswift Laboratories Ltd., which held that interest is leviable from the date of wrong credit availment. They argued that Rule 14 of the CCR mandates the payment of interest and penalty for such cases. The appellant countered this by referencing a Karnataka High Court case, Commissioner of Central Excise vs. Bill Forge, where it was stated that interest should be imposed only on delayed payment of duty, not from the date of wrong credit availment.

4. Judgment:
After hearing both parties, the tribunal found in favor of the appellant, setting aside the impugned order. Relying on the Karnataka High Court decision in Bill Forge, the tribunal concluded that interest should not be claimed from the date of wrong credit availment but from the date of actual utilization. Therefore, the tribunal allowed the appeals, providing consequential relief as deemed necessary.