2016 (12) TMI 853 - AT - Service Tax

Demand of interest - reversal of credit on different dates - interest on such credits from the dates of availing till the dates of reversal - time bar - Held that - The main contention of the appellant is that the Show Cause Notice issued to demand interest is barred by limitation inasmuch as it has been issued after the period of 1 year prescribed for demand of duty under Section11A. Perusal of Section 11 A, as it stood at relevant time, reveals that it did not specifically provide for recovery of interest. In the case laws cited by the appellant EMCO LTD. vs. Commissioner of C. EX., Mumbai 2011 (6) TMI 567 - CESTAT, MUMBAI , it has been held that the period of limitation that applies to a claim for the principal amount would also apply to the claim of interest there on. Such view which stands approved by the Hon ble Supreme Court, also may be applied to the present case. I find on applying such a time limit that the demand for interest is hit by time bar as claimed by the appellant. Consequently, the demand raised for interest is to be set aside and the appeal succeeds. Appeal allowed - decided in favor of appellant-assessee.

Summary

Issues:
- Dispute over Cenvat Credit availed on input services
- Demand for interest on reversed credits
- Applicability of limitation period for demand of interest

Analysis:
The appeal in question pertains to a dispute regarding the Cenvat Credit availed by the appellant on certain input services between June 2005 and March 2008. The Revenue contended that the credits taken were not admissible, leading to the appellant reversing all such credits on different dates. However, a Show Cause Notice was issued proposing a demand for interest on these credits from the dates of availing till the dates of reversal. The Original Authority and the Commissioner (Appeals) upheld this demand, prompting the present appeal.

During the hearing, the appellant's advocate argued that since the disputed credits had been reversed without being utilized, no interest should be payable on them, even though they were deemed inadmissible. Furthermore, it was contended that the Show Cause Notice for demanding interest was time-barred, as it was issued beyond the normal limitation period of one year from the dates of availing the Cenvat Credit. The advocate cited two judgments supporting this position.

The Member (Technical) analyzed the situation and noted that while the Cenvat Credit had indeed been reversed by the appellant, the dispute centered on the demand for interest. The appellant's main argument was that the Show Cause Notice for interest was outside the limitation period prescribed for demanding duty under Section 11A. Referring to relevant case law and the interpretation of the limitation period, it was concluded that the demand for interest was indeed time-barred. Consequently, the demand for interest was set aside, leading to the success of the appeal.

In the final judgment, it was declared that the impugned order was set aside, and the appeal was allowed. The decision was made after a thorough analysis of the issues surrounding the disputed Cenvat Credit, the demand for interest, and the applicability of the limitation period for such demands.