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2017 (4) TMI 217 - AT - Central ExciseLevy of interest - Whether interest on the amount of CENVAT credit availed but not utilized is recoverable or otherwise? - Rule 14 of the CCR, 2004 - Held that - I do not find merit in the contentions raised in the respective appeals that mere availment of CENVAT credit without its utilisation of the same will not attract interest at appropriate rate under Rule 14 of Cenvat Credit Rules, 2004 as was in force during the relevant time. However, as far as recovery of interest is concerned for invoking extended period of limitation, the principle laid down in this regard including the judgment of Hon ble High Court in the case of Hindustan Insecticides Ltd. vs. C.C.E., LTU 2013 (8) TMI 225 - DELHI HIGH COURT will be applicable, where it was held that Payment of interest is to be made under Section 11A and, therefore, the period of limitation prescribed therein would equally apply as has been held by the Delhi High Court in the case of Kwality Ice Cream Company 2012 (1) TMI 88 - Delhi High Court and Gujarat High Court in Gujarat Narmada Fertilizers Company Limited 2012 (4) TMI 309 - GUJARAT HIGH COURT - appeals are remanded to the adjudicating authority for the limited purpose of verification of the fact whether extended period of limitation for recovery of interest is applicable or otherwise - appeal allowed by way of remand.
Issues Involved:
1. Penalty and Interest on CENVAT Credit: Whether interest is recoverable on inadmissible CENVAT credit availed but not utilized. 2. Conflicting Judicial Views: Interpretation of Rule 14 of CENVAT Credit Rules, 2004, and its amendment. 3. Extended Period of Limitation: Applicability of extended period for recovery of interest. Detailed Analysis: Penalty and Interest on CENVAT Credit: The primary issue revolves around whether interest is recoverable on inadmissible CENVAT credit availed but not utilized. The appellants argued that since the credit was reversed before utilization, no interest should be charged. The Department, however, proposed to recover interest for the period of availing the CENVAT credit, citing Rule 14 of CENVAT Credit Rules, 2004. The Tribunal noted that Rule 14, as interpreted by the Supreme Court in the case of Indo Swift Laboratories Ltd., indicates that interest is recoverable on credit taken or utilized wrongly. The Supreme Court emphasized that "or" should not be read as "and," meaning interest is applicable even if the credit is not utilized but merely availed. Conflicting Judicial Views: The appellants cited various High Court judgments supporting their stance, including Bill Forge Pvt. Ltd. and Dynaflex Pvt. Ltd., which held that interest is not chargeable if the credit is reversed before utilization. However, the Department countered with judgments from the Madras High Court (Sundaram Fasteners Ltd.), Chhattisgarh High Court (Vandana Vidyut Ltd.), and Bombay High Court (GL & V India Pvt. Ltd.), which upheld the Supreme Court's interpretation in Indo Swift Laboratories Ltd. The Tribunal acknowledged the conflicting views but leaned towards the Supreme Court's ruling and subsequent High Court judgments supporting the recovery of interest on availed but not utilized credit. Extended Period of Limitation: The appellants also contested the applicability of the extended period for recovering interest. They argued that the demand for interest was barred by limitation, especially when the credit was reversed without utilization. The Department, however, maintained that the extended period was applicable due to the suppression of relevant facts. The Tribunal referenced the Delhi High Court's judgment in Hindustan Insecticides Ltd., which stated that the period of limitation prescribed under Section 11A of the Excise Act applies to the recovery of interest. The Tribunal remanded the appeals to the adjudicating authority to verify whether the extended period of limitation was applicable, following the principles laid down in this regard. Conclusion: The Tribunal concluded that interest is recoverable on inadmissible CENVAT credit availed but not utilized, aligning with the Supreme Court's interpretation in Indo Swift Laboratories Ltd. The Tribunal also clarified that the amendment to Rule 14, which substituted "taken or utilized" with "taken and utilized," is not retrospective and does not affect the applicability of interest for the period in question. On the issue of limitation, the Tribunal remanded the appeals for verification of the applicability of the extended period for recovering interest, based on the principles established by relevant judicial precedents. Disposition: The appeal by the Revenue was rejected, and the remaining appeals were remanded for further verification on the limitation issue.
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