2018 (12) TMI 87 - AT - Service Tax

Demand of Interest and penalty - CENVAT Credit availed but not utilized - Rule 14 of Cenvat Credit Rules - Held that - Vide an amendment in rule 14 the word or used herein has been substituted with word and . This particular amendment makes it clear that it is only when cenvat credit taken is utlised that the assessee shall be liable to pay the interest. Else no interest liability shall devolve upon the assessee. No doubt, the period in dispute is the period prior to the aforesaid amendment. But law has been settled that any amendment, which is beneficial in nature for the assessee has to be given a retrospective effect. The decision as relied upon by the appellant in the case of Bill Forge Pvt. Ltd. 2011 (4) TMI 969 - KARNATAKA HIGH COURT makes it clear that even prior the amendment, the opinion formed was that since the assessee has not taken the benefit of the cenvat credit taken except entry in their account books, there was no liability to pay the interest. Demand of interest and penalty set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Recovery of cenvat credit on capital goods availed by the appellant.
2. Liability of interest on the credit reversed by the appellant.
3. Interpretation of Rule 14 of Cenvat Credit Rules regarding recovery of wrongly taken or erroneously refunded credit.

Analysis:
1. The appellant, engaged in providing various services, availed cenvat credit on capital goods but did not pay an amount equal to the credit on clearance of the goods. The Department proposed recovery of the credit amount along with interest and penalties, which was confirmed in the order by the Commissioner (Appeals). The appellant challenged the order, arguing that the demand for recovering the credit amount should be set aside. The Tribunal considered the arguments and previous decisions, noting the amendment in Rule 14 substituting "or" with "and." The Tribunal held that the liability to pay interest arises only when the credit is utilized, not just taken, as clarified by the subsequent amendment. The Tribunal referred to previous judgments supporting this interpretation and set aside the demand for interest on the reversed credit, allowing the appeal.

2. The key point of consideration was whether mere taking of cenvat credit without utilization would impose liability on the assessee for interest/penalty. Rule 14 of Cenvat Credit Rules was crucial, stating that recovery of wrongly taken or erroneously refunded credit should include interest. The Tribunal emphasized the significance of the amendment in Rule 14, which clarified that interest liability arises only when the credit is both taken and utilized. The Tribunal highlighted that even before the amendment, judgments indicated that not utilizing the credit after taking it did not attract interest payment. The Tribunal cited a High Court decision post-amendment, reinforcing that mere taking of credit does not compel payment of interest or penalty. The Tribunal concluded that the order under challenge failed to consider the subsequent amendment and past decisions, leading to the setting aside of the demand for interest on the reversed credit.

3. The Tribunal thoroughly analyzed the interpretation of Rule 14 in light of the amendment and previous judgments. The Tribunal clarified that the liability for interest on wrongly taken or refunded credit arises only when the credit is both taken and utilized, as per the amended rule. The Tribunal referenced specific cases and amendments to support its decision to set aside the demand for interest on the credit reversed by the appellant. The Tribunal's detailed analysis of the rule and relevant legal precedents ensured a fair and just determination of the issue regarding the recovery of cenvat credit and liability for interest.