2022 (12) TMI 365 - AT - Central Excise

Levy of interest and penalty - Reversal of CENVAT Credit (without utilization) on being pointed out, before issuance of SCN - malafide intent or not - extended period of limitation - HELD THAT - There is no dispute that the appellant have wrongly availed the cenvat credit and subsequently reversed. The provision for interest is made under Rule 14 of the Cenvat Credit Rules, 2004 - From the plain reading of rule 14 of CCR, it is clear that the interest is chargeable in event of either wrongly availed credit or wrongly utilized. Therefore, even though the credit was not utilized but since the credit was wrongly availed the interest is unavoidably chargeable. Following the Supreme Court judgment in the case of UOI AND ORS. VERSUS IND-SWIFT LABORATORIES LTD. 2011 (2) TMI 6 - SUPREME COURT , the interest is chargeable. Hence, the demand of interest is upheld. Extended period of limitation - Penalty under section 11 AC which is equal to the amount of cenvat credit availed - HELD THAT - The show cause notice has invoked the extended period, the ingredients for invoking extended period for demand as well as for imposition of penalty under section 11 AC are same. The demand being under extended period the penalty is inevitable, once demand is sustainable for extended period, the penalty under section 11 AC is imposed as mandatory - There is no dispute that the appellant have availed the cenvat credit during January 2005 to march 2007 and it is on pointed out by the department the same was reversed on 20.07.2007. The wrong availment of credit was suppressed from the department as the department was not aware that the credit taken by the appellant was pertaining to their other unit. In this circumstance the extended period was rightly invoked. Therefore, the demand for the extended period as well as equal penalty is sustainable. Appeal is dismissed.

Summary

Issues:
1. Whether interest and penalty can be imposed when the appellant reversed the Cenvat credit prior to utilization.
2. Whether the extended period of limitation can be invoked in the present case.

Analysis:
1. The appellant mistakenly availed Cenvat credit at their Anode Factory in relation to another factory, which was later reversed upon department's pointing out. The department issued a show cause notice proposing to appropriate the reversed credit, charge interest, and impose a penalty. The lower authorities upheld the demand of interest and penalty. The appellant argued that since the credit was not utilized and reversed promptly, they should not be liable for interest or penalty. The appellant also claimed no malafide intention and that the extended period should not be invoked. The Tribunal held that interest is chargeable even if the credit was not utilized but wrongly availed, citing the Supreme Court judgment in Ind-Swift Laboratories. Therefore, the demand for interest was upheld.

2. Regarding the penalty under section 11 AC, the Tribunal noted that the extended period was invoked, and the penalty is mandatory when demand under the extended period is sustained. Citing the Supreme Court judgment in Union of India Vs. Dharamendra Textile Processors, the Tribunal upheld the penalty imposition. The appellant's argument that the credit reversal before the show cause notice should reduce or waive the penalty was rejected. The Tribunal found that the appellant suppressed the wrong availment of credit from the department, justifying the invocation of the extended period. Therefore, the demand for the extended period and penalty was deemed sustainable. The impugned order was upheld, and the appeal was dismissed.