Confirmation of interest liability on appellant

PJ/CASE LAW/2016-17/3224

Case-Shri S.K. Mohanty, Member (J) STAR DELTA TRANSFORMERS LTD. VersusCOMMISSIONER OF C. EX. & S.T., BHOPAL

Citation- 2016 (337) E.L.T. 297 (Tri. - Del.)

Brief Facts-The brief facts of the case are that during the disputed period, the appellant had availed Cenvat credit of service tax paid on the goods transport agency service utilized for outward transportation of goods, which is beyond the place of removal i.e. factory gate. The Department initiated proceedings for recovery of wrongly availed Cenvat credit along with interest and also for imposition of penalty. The matter was adjudicated vide order dated 31-12-2013 in confirming the proposal made in the show cause notice. Upon communication of the adjudication order, the appellant had reversed the wrongly availed Cenvat credit and intimated the Department accordingly. However, feeling aggrieved with the said adjudication order with regard to confirmation of interest liability and imposition of penalty, the appellant had preferred appeal before the Commissioner (Appeals) which was disposed of vide the impugned order dated 30-9-2014, wherein penalty imposed in the adjudication order was dropped and confirmed the interest liability on the appellant, which is the subject matter of the present dispute.

Appelants Contention- Ms. Neha Meena, ld. Advocate appearing for the appellant submits that since, the Cenvat credit taken inadvertently on the disputed service was reversed before its utilisation for payment of Central Excise Duty on clearance of the finished goods, the credit entry in the Cenvat register should be considered as mere book entry. She further submits that since there is no loss of Revenue to the Government Exchequer in view of the fact that the credit has not been utilised, confirmation of interest liability for late reversal of Cenvat credit is not proper and appropriate. To support her said view, the ld. Advocate has relied on the judgment of Hon’ble Karnataka High Court in the case of Commissioner of Central Excise and Service Tax, Bangalore v. Bill Forge Pvt. Ltd. reported in 2012 (26)S.T.R. 204 (Kar.) and also the decision of this Tribunal in the case of GTA Infrastructure Ltd. v. Commissioner of Service Tax (Mum.) reported in 2015 (37)S.T.R. 577 (Tri.-Mum.).

Respondents Contention- Shri R.K. Singh, ld. DR appearing for the Revenue submits that since the credit has been taken irregularly and reversed subsequently; between the date of taking credit and reversal thereof, the appellant is liable to pay interest in terms of Rule 14 of the Cenvat Credit Rules, 2004. To support his above stand, the ld. D.R. has relied on the judgment of Hon’ble Supreme Court in the case of Union of India v. Ind-Swift Laboratories Ltd. reported in 2012 (25)S.T.R. 184 (S.C.).

Reasoning Of Judgement- From available records it is found that the Cenvat credit taken irregularly has not been utilized for payment of Central Excise Duty on removal of the finished goods. Thus, there is no loss of Revenue, and as such, interest demand for late reversal of Cenvat credit is not proper. In this context, the Hon’ble Karnataka High Court in an identical set of facts in the case of Bill Forge (supra) have held that the assessee have not taken or utilized the credit but only availed wrong credit in their account book and on pointing out the mistake, since the assessee reversed the entry, it cannot be said that any benefit of such wrong entry was taken, and thus, the interest is not payable. The issue involved in the case of Ind-Swift Laboratories Ltd. (supra) is different from the facts of the present case as the Cenvat credit was taken by the assessee on the strength of fake invoice and the credit was not reversed by the assessee but it was recovered by way of demanding duty. Since, in the present case, Cenvat credit before its utilization was reversed by the appellant, the said judgment of Hon’ble Supreme Court relied on by the ld. D.R. is not applicable to the facts of this case.

Decision- Appeal allowed

Comment- The crux of the case is that if the assessee has delayed in reversal of wrongly availed Cenvat credit in respect of outward transportation of goods due to which interest liability is imposed, then, interest cannot be demanded from the assessee as the credit taken has not been utilized for payment of Central Excise duty. It has been notified in Section 11AA of Central Excise Act, 1944

Prepared By-Ritika Mehta

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PJ/CASE LAW/2016-17/3224

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