2018 (1) TMI 356 - AT - Central Excise

Interest on wrongly availed CENVAT credit - primary defence of the appellants is that they have not utilised the said credit and it was merely a book entry - Held that - the entire credit available at the end of the month of May 2011 was utilised by the appellants in the month of June itself. In these circumstances, it cannot be said that the credit taken was not utilised and was merely a book entry. In these circumstances, the provisions of Rule 2014 are clearly attracted and appellant is liable to pay interest and penalty. Extended period of limitation - Held that - The appellant had not noticed this for almost one and half years during which they would have got their annual report made and accounts audited for preparing balance sheet. It cannot be but a result of deliberate act - the invocation of extended period is justified. Appeal dismissed.

Summary

Issues involved: Appeal against demand of interest and imposition of penalty, challenge to demand of credit on the ground of limitation, sustainability of show-cause notice, invocation of extended period of limitation, liability to pay interest and penalty.

Analysis:

1. Demand of Interest and Imposition of Penalty: The appellant, M/s. Komatsu India Pvt. Ltd., filed an appeal against the demand of interest and imposition of penalty. The counsel argued that the cenvat credit wrongly availed was reversed without utilization, hence interest should not be demanded, and penalty should not be imposed. The appellant also challenged the demand of credit on the ground of limitation, contending that the conditions for invoking the extended period of limitation were not met. The counsel cited relevant legal precedents to support their arguments, including decisions from the Hon'ble High Court of Madras and other cases. However, the tribunal noted that the appellant had availed credit twice on the same documents in May 2011, exceeding ?25 lakhs. Despite the credit being reversed in December 2012 without utilization, the tribunal found that the entire credit available in May 2011 was utilized in June of the same year. Consequently, the tribunal held that the provisions of Rule 2014 were applicable, making the appellant liable to pay interest and penalty.

2. Challenge on the Ground of Limitation: The appellant's counsel sought to invoke the provisions of limitation in their defense. However, the tribunal observed that the substantial amount of credit wrongly availed, exceeding ?25 lakhs, could not have gone unnoticed by the appellant for over a year and a half. The tribunal considered such oversight as a deliberate act on the part of the appellant, justifying the invocation of the extended period of limitation in this case. Therefore, the tribunal dismissed the appeal, emphasizing the appellant's liability to pay interest and penalty.

3. Sustainability of Show-Cause Notice: The tribunal did not find the show-cause notice sustainable, as the appellant had availed credit twice on the same documents in May 2011, exceeding the permissible limits. Despite the appellant's argument that the credit reversal was done without utilization, the tribunal's scrutiny revealed that the entire credit was utilized in the subsequent month. This utilization contradicted the appellant's claim that the credit was merely a book entry, leading to the conclusion that the appellant was liable to pay interest and penalty as per the relevant provisions.

4. Invocation of Extended Period of Limitation: The tribunal justified the invocation of the extended period of limitation based on the substantial amount of credit wrongly availed by the appellant, which could not have escaped their notice for an extended period. The tribunal considered the appellant's failure to rectify the error for over a year and a half as a deliberate act, supporting the decision to apply the extended period of limitation. Consequently, the tribunal dismissed the appeal, reinforcing the appellant's liability to pay interest and penalty as mandated by the law.

In conclusion, the tribunal's decision upheld the demand of interest and imposition of penalty against the appellant, emphasizing the significance of compliance with cenvat credit regulations and the consequences of non-compliance, including the applicability of interest and penalties in cases of wrongful credit availment.