2017 (11) TMI 867 - AT - Central Excise

Interest and penalty - CENVAT credit availed wrongly, was reversed - Held that - Since 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 - reliance placed in the case of COMMISSIONER OF CENTRAL EXCISE & SERVICE TAX LARGE TAXPAYER UNIT, BANGALORE Versus M/s BILL FORGE PVT LTD, BANGALORE 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 - demand set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeal against rejection of appeals by Commissioner (A) - Excess CENVAT credit availed irregularly - Liability to pay interest and penalty.

Analysis:
The appellant filed two appeals against orders dated 30.12.2013 by the Commissioner (A) rejecting their appeals. The common issue in both appeals was the irregular availing of excess CENVAT credit. The Department found that the appellant had availed excess credit twice on the same input document, totaling ?17,75,466, irregularly in their CENVAT Credit account. The Department issued a show-cause notice, leading to an Order-in-Original confirming the demand, interest of ?5,22,323 under Section 11AB, and imposing a penalty of ?17,75,466 under Rule 15(2) of CENVAT Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944. The appellant appealed to the Commissioner (A), who upheld the Orders-in-Original.

Upon hearing both parties, it was noted that the issue had been settled in favor of the appellant by the decisions of the Hon'ble Karnataka High Court and other cases. It was established that interest and penalty are not imposable when wrongly availed credit has been reversed before utilization. The appellant cited precedents where similar demands for interest and penalties were set aside. The Larger Bench of the Tribunal also held that interest liability does not arise if the availed credit is reversed before utilization.

In light of the precedents and the decision of the Larger Bench, it was concluded that no interest was demandable from the appellant, and no penalty could be imposed. Therefore, the impugned order was set aside, and the appeal was allowed with any consequential relief. The operative portion of the order was pronounced in Open Court on 13/09/2017.