2024 (2) TMI 669 - AT - Central Excise

Recovery of interest on the wrongly availed credit - penalty under Rule 15 of the Cenvat Credit Rules, 2004 - HELD THAT - The issue involved in the present case is squarely covered by the decision of Hon ble Supreme Court in the case of M/s Ind-Swift Laboratories Ltd. 2011 (2) TMI 6 - SUPREME COURT following has been held Rule 14 specifically provides that where CENVAT credit has been taken or utilized wrongly or has been erroneously refunded, the same along with interest would be recovered from the manufacturer or the provider of the output service. The issue is as to whether the aforesaid word OR appearing in Rule 14, twice, could be read as AND by way of reading it down as has been done by the High Court. If the aforesaid provision is read as a whole we find no reason to read the word OR in between the expressions taken' or utilized wrongly' or has been erroneously refunded' as the word AND . On the happening of any of the three aforesaid circumstances such credit becomes recoverable along with interest. It is quite evident that the N/N. 18/2012-CE (NT) clearly provides the date from which the word or has been substituted in Rule 14 of The CENVAT Credit Rules, 2004. It is unambiguously provided that the substitution is being made from 17th March 2012, and no retrospective effect has been given to the said amendment/ substitution - It is settled position in law that physical statute need to be interpreted in a literal sense on the basis of what have been stated in the law or statute. There is no room for indictment or according to any beneficial construction to the appellant/assessee. It is also settled law that interest is a statutory/ contractual liability for the wrongly taken credit or is equivalent to the time value of the money/credit. It is an absolute liability as has been held by the courts in the various decisions for the same no person could claim the benefit and claim that interest as provided by the statute could not have been recovered as has been held the same is barred by limitation. It was for the appellant to have paid the interest along with the reversal of the excess credit taken. It is also observed that during the period of dispute section 11A did not provided, for recovery of interest and hence was not applicable. The recovery of interest was made in terms of Section 11AB/ 11AA which did not provided for any limitation. As the demand made within the period of five years for recovery it is upheld, there are no merits in the submissions made for not imposition of the penalties imposed under Rule 15, in view of the decision of the Hon ble Apex Court in the case of Rajasthan Spinning and Weaving Mills Ltd 2009 (5) TMI 15 - SUPREME COURT . There are no merits in the appeal filed by the appellant - appeal dismissed.

Issues Involved:
1. Demand for recovery of interest on wrongly availed Cenvat credit.
2. Imposition of penalty under Rule 15 of the Cenvat Credit Rules, 2004.
3. Timeliness of the show cause notice.
4. Applicability of amendments to Rule 14 of the Cenvat Credit Rules, 2004.

Summary:

1. Demand for Recovery of Interest on Wrongly Availed Cenvat Credit:
The Tribunal upheld the demand for recovery of interest amounting to Rs. 48,32,438/- and Rs. 98,151/- on the wrongly availed credit of Rs. 6,40,00,000/- and Rs. 7,16,523/- respectively, under Rule 14 of the Cenvat Credit Rules, 2004 read with Section 11AB of the Central Excise Act, 1944. The Tribunal noted that Rule 14 clearly provides for the levy of interest on credit taken or utilized wrongly, irrespective of whether the same has been utilized or not. This interpretation was supported by the Supreme Court's ruling in the case of Ind-Swift Laboratories Ltd., which stated that interest is recoverable on any of the three circumstances: credit taken wrongly, utilized wrongly, or erroneously refunded.

2. Imposition of Penalty under Rule 15 of the Cenvat Credit Rules, 2004:
The Tribunal also upheld the penalty of Rs. 49,30,589/- imposed under Rule 15 of the Cenvat Credit Rules, 2004. The appellant's argument that the penalty should not be imposed because the credit was reversed before utilization was rejected. The Tribunal relied on the Supreme Court's decision in Rajasthan Spinning and Weaving Mills Ltd., which supported the imposition of penalties in such cases.

3. Timeliness of the Show Cause Notice:
The appellant argued that the show cause notice was issued beyond the normal period of limitation without alleging any evasion of tax by suppression of facts or fraud. The Tribunal, however, noted that Section 11AB of the Central Excise Act, 1944, which governs the recovery of interest, does not prescribe any time limit for such recovery. This interpretation was supported by several judicial pronouncements, including those from the Bombay High Court and the Delhi Bench of the Tribunal, which held that no time limit applies to the recovery of interest under Section 11AB.

4. Applicability of Amendments to Rule 14 of the Cenvat Credit Rules, 2004:
The appellant contended that the amendment to Rule 14, which substituted the words "taken or utilized wrongly" with "taken and utilized wrongly," should apply retrospectively. The Tribunal rejected this argument, noting that the amendment explicitly stated it would come into force on 17th March 2012, and no retrospective effect was given. The Tribunal also cited Section 38A of the Central Excise Act, 1944, which ensures that amendments do not affect the previous operation of any rule or the rights, obligations, or liabilities acquired under it.

Conclusion:
The Tribunal dismissed the appeal, upholding the demand for recovery of interest and the imposition of penalties. The decision was based on the clear statutory provisions and supported by various judicial precedents, including those from the Supreme Court and High Courts. The Tribunal emphasized the importance of strict interpretation of fiscal statutes and the automatic liability for interest on wrongly availed Cenvat credit.

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