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TMI Blog2014 (2) TMI 551X X X X Extracts X X X X X X X X Extracts X X X X ..... AT credit has been utilized wrongly for according to the High Court interest cannot be claimed simply for the reason that the CENVAT credit has been wrongly taken as such availment by itself does not create any liability of payment of excise duty - A statutory provision is generally read down in order to save the said provision from being declared unconstitutional or illegal. 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. Therefore, the question of quantum of demand, should not be a going factor, more so, when a substantial question of law is involved - while confirming the order of the Tribunal on the levy of penalty under Section 11AC, we reverse the order of the Tribunal on the question of interest, as per Rule 14 read with Section 11AB and restore the order of the adjudicating authority levying interest - Decided partly in favour of Revenue. - C.M.A. No. 3477 of 2010 - - - Dated:- 30-1-2014 - Chitra Venkataraman And T. S. Sivagnanam,JJ. For the Appellant : Mr. P. Mahaadevan Sr. Coun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per Rule 2(k) of the Cenvat Credit Rules, 2004 either directly or indirectly and the CTD bars used in civil construction cannot be considered as "input" for the said final product. Accordingly, the proposal made in the show cause notice was confirmed. The assessee preferred appeal before the Commissioner of Central Excise (Appeals) and reiterated the stand taken before the adjudicating authority. The first appellate authority rejected the appeal by Order dated 11.01.2007 stating that the case is not a case of short payment or non payment of duty by the respondent falling under Section 11A, but it is a case of wrongful availment of the Cenvat Credit on inputs recoverable under Rule 14 of the Cenvat Credit Rules, 2004 and the respondent having availed Cenvat Credit, the mere reversal of credit before issuance of show cause notice will not absolve them from the liability to pay penalty under Rule 14 read with Section 11AC of the Act and the penalty being mandatory there cannot be any exception to it. Aggrieved by such order, the assessee preferred appeal to the Tribunal. Before the Tribunal, the assessee fairly stated that on merits they do not have a case as the issue has been settl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reported in 2011 (265) ELT 3 (SC). In the said case, the High Court read down the Rule to mean that where CENVAT credit has been taken and utilized wrongly, interest should be payable from the date the CENVAT credit has been utilized wrongly and interest should not be claimed simply for the reason that the CENVAT credit has been wrongly taken as such availment by itself does not create any liability of payment of excise duty. The assessee's case in this appeal is that the credit has been reversed. Therefore, mere wrong availment will not attract payment of interest as reversal of credit would amount to "no credit" being taken. The Hon'ble Supreme Court held that the High Court misread and misinterpreted Rule 14 and wrongly read it down without properly appreciating the scope and limitation thereof. It further pointed out that a statutory provision is generally read down in order to save the said provision from being declared unconstitutional or illegal and 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 servi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o whether reversal of credit after the removal of the final product would entitle the assessee therein to the benefits of exemption notification, which states that the reversal of the credit should be done before the removal of the products. In such circumstances, the Courts considered the issue and said that for the purpose of extending the benefits of exemption notification, the time of reversal was not the material and reversal of the credit would amount to "no credit" being taken. In these decisions, Rule 14 or Section 11AB was not the subject matter for consideration. Therefore, these decisions relied upon by the learned counsel for the assessee are clearly distinguishable by facts, while read in the context of the facts and relevant notification which are applicable to the facts of the case. 11. The one and only decision which concerns about Rule 14 is the decision reported in 2011 (265) ELT 3 (SC), where the Hon'ble Supreme Court in paragraph No.17 has clearly pointed out that on the happening of any of the three situations viz., credit taking credit, utilizing it wrongly or erroneously refunding the credit, becomes recoverable along with interest. In paragraph Nos.16 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in 1996 (81) ELT 3 (SC), 2004 (174) ELT 422 (All.), and 2012 (279) ELT 209 (Kar.) 13. The learned counsel for the assessee submitted his notes on the contention that interest being compensatory and that question of payment of interest would arise only where the principal is due. To that contention, by placing reliance on the decision reported in 1996 (88) ELT 12 (SC) (Prathiba Processors vs. Union of India as well as the decision reported in 2007 (215) ELT 3 (CCE v s. Bombay Dyeing), the learned counsel for the assessee contended that, when credit has been reversed before utilization, the same did not amount to taking credit. 14. We reject the arguments of the assessee . In the said decisions, it has been no doubt held that interest is compensatory and the question arises only where principal is due. If one gets into the background of the scheme of Modvat Credit, his contention that the assessee has taken credit, does not merit consideration, particularly so, in the background of Rule 14. As it stands today, one has to go only by the provisions contained in Rule 14 and nothing beyond. 15. Further, the decision rendered in Bombay Dyeing case reported in 2007 (215) E.L.T. 3 (S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh Court in the case of CIT, BANGALORE v. RANKA RANKA reported in 2012 (284) ELT 185 (Kar.), submitted that the circular dated 17.8.2011, issued by the Central Board of Excise and Customs, should be made applicable to pending cases also and the Karnataka High Court has taken a view that the benefit to which the assessee is entitled to, should not be dependant on the date of decision, over which neither the assessee nor the Revenue has any control. In that context, the circular would be discriminatory, if it is held to be prospective only. 40. We find from the materials placed by the learned counsel for the Revenue that the said decision is the subject matter of Appeal before the Supreme Court in SLP (Civil) No.27468 of 2012, which is stated to be pending. That apart, in yet another case, in the appeal which arose from the High Court of Delhi in the case of COMMISSIONER OF INCOME TAX v. SURYA HERBAL LTD., while disposing of the Special Leave Petition in SLP (Civil) CC NO.13694 of 2011, by order dated 29.8.2011, the Honourable Supreme Court, pointing out that the Circular dated 09.02.2011 should not be applied ipso facto, particularly when the matter has a cascading effect, grant ..... X X X X Extracts X X X X X X X X Extracts X X X X
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