2019 (11) TMI 437 - AT - Service Tax

Demand of interest and penalty - Reversal of CENVAT Credit - duty paid on various inputs and inputs services during the period March, 2009 to October, 2010 - reversal of illegally availed CENVAT credit without utilizing the same - time limitation - HELD THAT - Hon ble Supreme Court in the case of UOI AND ORS. VERSUS IND-SWIFT LABORATORIES LTD. 2011 (2) TMI 6 - SUPREME COURT was considered by the Hon ble Karnataka High Court in the case of Bill Forge 2011 (4) TMI 969 - KARNATAKA HIGH COURT and it is only after consideration of the said Apex Court decision, it was held that in case the availed Cenvat credit is not utilized, no interest liability would arise. The credit availed by the appellant in the present case was not utilized and remained only in their account books. The same was subsequently reversed by the appellant suo motu on realization that the same was not available to them. In such a scenario, no loss of revenue has occurred to the department so as to confirm the interest, which is nothing but payment to compensate any monetary loss - the confirmation of the interest for making the entry in the records, is neither justified nor in accordance with law. Time Limitation - HELD THAT - The wrongly availed credit was reversed by the appellant in October, 2010 by reflecting the same in their ST3 returns, whereas the show cause notice stand issued on 18.10.2012 - Inasmuch as the demand of interest in the present case is by invoking the longer period of limitation, for which there are no justifiable reasons - the demand is held to be time barred. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Availment of Cenvat credit without utilization and subsequent reversal.
2. Demand of interest on the availed Cenvat credit.
3. Applicability of interest liability when credit is not utilized.
4. Bar of limitation on the demand of interest.

Analysis:
1. The appellant started constructing a hotel and registered with the department to avail Cenvat credit of duty paid on inputs and input services from March 2009 to October 2010, amounting to around ?3.10 crore. The appellant reversed the credit in October 2010 without utilizing it, reflecting the reversal in their ST3 returns.

2. An audit in October 2012 raised a demand of interest of ?33,13,976 on the availed and reversed Cenvat credit. The lower authorities confirmed the demand and imposed penalties, leading to the present appeal.

3. The appellant argued that since the credit was not utilized and was only a paper entry, interest confirmation was not justified. They cited a Karnataka High Court decision where it was held that if availed credit is not utilized, no interest liability arises. The appellant's reversal of credit without utilizing it did not cause any revenue loss to the department, making the interest demand unjustified.

4. The Tribunal found that the demand was time-barred as the appellant had reversed the credit in October 2010, while the show cause notice was issued in October 2012. Citing a Delhi High Court decision, the Tribunal held that the limitation provisions equally apply to interest demands. Since the demand invoked a longer period of limitation without justifiable reasons, it was deemed time-barred.

5. Consequently, the Tribunal set aside the impugned order, allowing the appeal with consequential relief.