2017 (11) TMI 1469 - AT - Central Excise

Liability of interest and penalty - irregular availment of Cenvat Credit of Customs Education Cess paid against the Bills of Entry (but not utilised) - Held that - the wrongly availed Cenvat Credit of ₹ 21,44,480/-, had never been utilized by the appellant for payment of duty on the finished goods removed by it from the factory. Since the appellant had all along maintained sufficient balance in between the period of taking of Cenvat Credit and its subsequent reversal, such entry in the Cenvat account will be considered as a mere book entry and in absence of its utilization, demand of interest and penalty cannot be confirmed against the appellant. Identical issue decided 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 once the entry was reversed, it is as if that the Cenvat credit was not available. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Irregular availing of Cenvat Credit without utilization leading to interest and penalty imposition.

Analysis:
The case involved the appellant, engaged in the manufacture of contact wire and Centenary wire, who had wrongly availed Cenvat Credit of Customs Education Cess without utilizing it for payment of Central Excise duty on finished goods. The Central Excise Department initiated proceedings resulting in an order confirming the Cenvat Credit amount and imposing a penalty. The appellant argued that since the credit was not utilized, it was merely a book entry, citing the judgment of the Karnataka High Court in Bill Forge Pvt. Ltd. The Revenue contended that interest and penalty were justified due to the irregular availing of credit, even if subsequently reversed.

The Tribunal found that the appellant had indeed reversed the irregularly availed Cenvat Credit upon detection by the Audit Wing, and the amount was never utilized for duty payment. The Tribunal noted that the appellant maintained a sufficient balance during the period in question, treating the entry as a mere book entry without utilization. Referring to the judgment of the Karnataka High Court, the Tribunal emphasized that the provisions for recovery applied when credit was wrongly taken or utilized, not merely availed. It clarified that interest is compensatory and imposed on delayed payment of duty, not from the date of wrong availment. Therefore, the Tribunal allowed the appeal, setting aside the impugned order.

In conclusion, the Tribunal ruled in favor of the appellant, highlighting that the irregularly availed Cenvat Credit, which was subsequently reversed and not utilized for duty payment, did not warrant the imposition of interest and penalty. The judgment underscored the importance of actual utilization of credit for duty payment and clarified the applicability of provisions for recovery in cases of wrongly taken or utilized credit.