2019 (3) TMI 1366 - AT - Central Excise

Demand of interest and penalty - wrongly availed credit has been reversed - Held that - Appellant have reversed the wrongly availed credit before its utilization - In such circumstances, following the decision in the case of M/s. Strategic Engineering (P) Ltd., 2014 (11) TMI 89 - MADRAS HIGH COURT the demand of interest and the penalties imposed cannot sustain - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Demand of interest and penalty imposed on wrongly availed credit despite reversal

Analysis:
The judgment by the Appellate Tribunal CESTAT Chennai addressed the issue of interest and penalties imposed on wrongly availed credit that had been subsequently reversed by the appellants. The appellants, manufacturers of Steel Forgings and machined Aluminium rings and End cuttings, availed Cenvat credit on inputs, input services, and capital goods. Show-cause notices were issued for different periods proposing to deny the Cenvat credit availed on various input services. The original authority disallowed the credit on certain services, leading to the appellants contesting the demand of interest and penalty imposed after reversing the wrongly availed credit. The Commissioner (Appeals) confirmed the demand, interest, and penalties, prompting the appellants to appeal to the Tribunal.

During the proceedings, the appellants argued that they had initially availed the credit based on invoices, but were unable to produce them before the Commissioner (Appeals) as they were misplaced. They had, however, reversed the credit after adjudication. The appellants cited a precedent, Commissioner of Central Excise, Madurai Vs M/s. Strategic Engineering (P) Ltd., to support their argument that interest and penalties cannot be sustained when wrongly availed credit has been reversed before utilization. They also presented documents demonstrating sufficient credit balance during the relevant period.

The learned Authorised Representative supported the findings in the impugned order. After hearing both sides, the Tribunal concluded that the demand of interest and penalties imposed could not be sustained since the wrongly availed credit had been reversed before utilization. Following the decision in the case of M/s. Strategic Engineering (P) Ltd., the Tribunal set aside the demand of interest and penalties while confirming the demand. Consequently, the appeals were allowed with any consequential reliefs. The judgment was dictated and pronounced in open court by Smt. Sulekha Beevi C.S, Judicial Member.