2021 (9) TMI 1264 - AT - Central Excise

Levy of Interest on reversed CENVAT credits for the extended period - violation of Rule 4(5)(a) of CENVAT Credit Rules 2004 - suppression of facts or not - extended period of limitation - HELD THAT - Show-cause cum demand notice was issued on 06.10.2016 for recovery of credit of Rs. 29, 41, 851/- against reversal of credits of Rs. 31, 39, 532/- made on 23.02.2016. It is needless to mention here that learned Commissioner (Appeals) had treated the other units as the sister concerns of the appellant in which the capital goods were installed (para 7.1 and 7.3 of his order). However he has confirmed the interest component as to him it is a civil liability under Section 11AA of the Central Excise Act and the same is unrelated to the intention of the appellant to evade payment of tax though he found imposition of penalty as harsh punishment unless there is clear evidence of fraud mis-statement or suppression of fact etc. with an intention to evade payment of Central Excise duty and he was satisfied that appellant had accepted the mistake and reversed the credit (duty). Such a finding on the learned Commissioner (Appeals) attained finality as no appeal is preferred by the respondent-revenue department against such order which learned Authorised Representative submits to be not appealable as covered under litigation policy. It is a settled principle of law that if the assessee feels it a duty to pay or discharge tax liability of any past period there is no prohibition to do so but such a liability can never be realised through the process of law unless the statute authorised the respondent-department to travel beyond the stipulated period as liability of the person to pay duty for the extended period would arise only when his/her intention to evade payment of duty is established - Be that as it may in the instant case the issue is reversal of credits which appellant had made immediately upon bringing the fact to its knowledge and much before issue of show-cause notice. Order imposing interest on reversed CENVAT credit is here by set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Appeal against imposition of interest on reversed CENVAT credits for the extended period when penalty under Section 11AC was set aside.

Analysis:
1. Facts and Background: The appellant purchased 10 capital goods and availed CENVAT credits totaling Rs. 29,41,851/- between September 2011 to May 2014. These machines were installed outside the appellant's factory but on the premises of a sister concern, except one in the proprietorship firm of the wife of the Director of the appellant's company. Failure to reverse the credits within 180 days of purchase and installation led to a show-cause notice dated 06.10.2016 invoking the extended period for recovery.

2. Adjudication and Appeal: The Order-in-Original dated 17.10.2017 confirmed demands, interest, and penalty, except for a credit of Rs. 3,12,992/- against goods installed in the appellant's premises. The Commissioner (Appeals) set aside the penalty but confirmed interest even for the extended period. The appellant contested this confirmation of interest before the Tribunal.

3. Legal Analysis: The issue before the Tribunal was confined to the legality of imposing and confirming interest on credits reversed before the show-cause notice. The Commissioner treated the other units as sister concerns, confirming interest as a civil liability under Section 11AA of the Central Excise Act. The Commissioner found the penalty harsh without clear evidence of fraud or intent to evade tax, noting that the appellant rectified the mistake promptly.

4. Decision and Rationale: The Tribunal allowed the appeal, setting aside the order imposing interest on reversed CENVAT credit. The decision was based on established legal principles that interest is not payable when credits are reversed promptly upon discovery, especially from available account credits. Citing relevant case law, the Tribunal concluded that no interest is due in such circumstances.

In conclusion, the Tribunal's decision to set aside the imposition of interest on reversed CENVAT credits for the extended period, while penalty under Section 11AC was set aside, was based on the principles of prompt rectification of errors and the absence of intent to evade tax, as supported by legal precedents.