2016 (11) TMI 931 - AT - Central Excise

Interest and penalty for taking the Cenvat credit wrongly - suo moto reversal of credit before utilisation of the same - whether the appellants are liable to pay interest on the said credit which was reversed? - Held that - it is seen that the appellant has reversed an amount of ₹ 6,57,169/which pertains to credit availed on capital goods/ventilation systems. The invoices produced by the appellant also evidence that these goods are classified under Chapter 84. In such circumstances, I am of the view that in the interest of justice, the appellant should be given a chance to establish and prove that the credit of ₹ 6,57,169/- is eligible for the reason that it is availed on ventilation systems. On this point, the matter has to be remanded to the adjudicating authority. However, the main issue whether appellant is liable to pay interest on the credit wrongly availed but reversed prior to utilization, is settled by the judgments relied upon by the appellants in the case of CCE Vs. Bill Forge pvt. Ltd. 2011 (4) TMI 969 - KARNATAKA HIGH COURT . In view thereof, I hold that the appellants are not liable to pay interest as well as the penalty which is confirmed in the impugned order. Therefore I set aside the impugned order to the extent of demand of interest and imposition of penalty The appeal is partly allowed as above and partly remanded for the limited purpose of adjudicating the issue whether the appellants are elgibile for the credit of ₹ 6,57,169/- availed on ventilation systems.

Summary

Issues:
Appeal against demand of interest and penalty on wrongly availed credit.

Analysis:
The appellant, engaged in manufacturing glass containers, availed CENVAT credit on capital goods but reversed a portion of the credit before utilization. The Department demanded interest and penalty on the reversed credit. The appellant argued that the issue of interest on reversed credit is settled by various Tribunal and High Court decisions. They claimed that the credit on ventilation systems, classified under Chapter 84, was mistakenly reversed and should be eligible. The Department contended that interest and penalty are justified, and the eligibility of credit on ventilation systems should be verified separately.

The Member(Judicial) observed that the appellant reversed credit on ventilation systems amounting to ?6,57,169, which falls under Chapter 84 as evidenced by invoices. The Member decided to remand the issue of credit eligibility on ventilation systems to the adjudicating authority for verification. However, based on precedents cited by the appellant, it was held that the appellant is not liable to pay interest or penalty on the wrongly reversed credit. Consequently, the impugned order demanding interest and penalty was set aside.

The appeal was partly allowed, setting aside the demand for interest and penalty, and partly remanded for verifying the eligibility of credit on ventilation systems. The judgment concluded by disposing of the appeal in the mentioned terms, providing relief to the appellant on the interest and penalty aspects while requiring further adjudication on the credit eligibility issue.