2018 (2) TMI 1009 - AT - Central Excise

Demand of interest and penalty - wrongful cenvat credit availed and reversed by the appellant - Held that - it is apparent that the credit utilized in most of the months is in excess of the credit available as closing balance in the previous months. In these circumstances, it cannot be said that the appellant has not utilized the credit wrongly availed - Hon ble High Court of Bombay in the case of GL&V India Pvt. Ltd. - 2015 (321) ELT 611 (Bom.) has held that interest can be demanded even if cenvat credit wrongly availed has not been utilized. Extended period of limitation - Held that - the period of limitation would be applicable to demand of interest and demand only within five years from the date of issuance of the same can be upheld. The impugned order is modified to that extent and the penalty and demand of interest is accordingly revised to that which is within five years from the date of issue of SCN. Appeal allowed.

Summary

Issues:
Appeal against demand of interest and penalty for wrongful cenvat credit availed and reversed by the appellant.

Analysis:
The appellant availed wrongful credit during 2006-07 to 2008-09, which was later reversed after an audit in December 2012. A show cause notice demanding interest and penalty was issued in January 2014. The appellant argued that the law applicable on the date of the notice should be considered. The appellant contended that as per Rule 14 of the Cenvat Credit Rules, recovery of wrongly taken credit along with interest should be from the manufacturer or service provider. The appellant emphasized that unless the credit is utilized, no interest demand can be made. Additionally, the appellant pointed out that the notice was issued beyond the five-year period and did not propose reversal of credit, thus challenging the interest and penalty. The appellant relied on the decision of the Bombay High Court in Emco Ltd. to support the limitation argument.

The Revenue, however, relied on the Bombay High Court's decision in Swan Mills Ltd. vs. UOI, stating that the limitation under Section 11A does not apply to interest demands. The Tribunal analyzed the submissions and found that the appellant had not utilized the credit correctly based on the provided data of credit balances. The Tribunal also referred to the Bombay High Court decision in GL&V India Pvt. Ltd., which allowed interest demands even if wrongly availed credit was not utilized. The appellant raised the limitation as a defense against interest demand, citing the Emco Ltd. case, which was affirmed by the Bombay High Court. The Tribunal compared the Emco Ltd. case with the Swan Mills Ltd. case and concluded that the limitation period applies to interest demands, limiting the penalty and interest demand to within five years from the date of the show cause notice.

In conclusion, the Tribunal allowed the appeal, modifying the order to restrict the penalty and interest demand to within five years from the date of the notice, based on the Emco Ltd. case and the limitation principle.