Interest imposition on credit without utilisation.

PJ/CASE LAW/2016-17/3043

Case:- COMMISSIONER OF CENTRAL EXCISE, RAIPUR VersusVANDANA VIDYUT LTD.

Citation:- 2016 (331) E.L.T. 249 (Tri. - Del.)

Brief facts:-Being aggrieved with the order passed by Commissioner (Appeals), revenue has filed the present appeal.
The respondents had obtained central excise registration for manufacture of various excisable goods on 6-9-2000. However, they had not installed the furnace and plant & machineries required for the manufacture of finished excisable goods even after a lapse of five years. But the respondents, meanwhile, installed and commissioned a biomass power plant for generation and sale of electricity to outside buyers. The respondents took Cenvat credit on various items as ‘inputs’ which were used in the manufacture of parts, components and accessories of capital goods items and as capital goods which were further used in the biomass power plant during the period October, 2000 to April, 2003. The respondents have been submitting monthly returns showing ‘NIL’ production and clearance of dutiable final products in respect of which central excise registration had been taken by them. As there was neither any plant and machinery installed for manufacture of excisable goods nor any activity of manufacturing process being carried on, the electricity generated out of the biomass power plant could not be used captively for manufacture of any excisable goods. Thus the credit so availed by the respondents appeared to be inadmissible. Therefore, three show cause notices were issued to the respondents for recovery of credit availed totally amounting to Rs. 62,97,587/- along with interest payable and for imposition of penalty. The lower authority has disallowed the credit and ordered for recovery of interest. However, no penalty was imposed.
The respondent reverse the credit, by accepting the same having been wrongly taken but contested the confirmation of interest on the ground that the said credit was not utilized by them and as such would not attract any interest.

Commissioner (Appeals) allowed the appeal by following the various decisions of the Tribunal laying that where the wrongly availed credit has not been utilized, no interest would be confirmed.
Hence, the present appeal.

Appellant’s contention:- Shri M.S. negi, AR, appeared for the appellant.

Respondent’s contention:- None is appeared on the behalf of respondent.

Reasoning of judgment:- They find that the short issue involved in the appeal revenue is that though the credit was wrongly availed by the respondent but remained as a paper enter only, interest would be attracted or not.
They find that the Hon’ble Supreme Court decision In the case of Commissioner of Central Excise, Pune v. SKF India Ltd. [2009 (239) E.L.T. 385 (S.C.)] was considered by the Hon’ble Karnataka High Court in the case of Commissioner of Central Excise & Service Tax, Bangalore v. Bill Forge Pvt. Ltd. [2012 (26)S.T.R.204 (Kar.) = 2012 (279) E.L.T. 209 (Kar.)]. It was held that if the credit availed by an assessee is reversed before utilization of the same, no interest liability would arise. By following the said decision, it has to be held that the respondents are not liable to pay any interest. Accordingly the appeals filed by the Revenue is rejected.

Decision:- Appeals rejected.

Comment:- The analogy of the case is that Credit wrongly availed by assessee only a paper transaction and same was not utilized. Relying in case of Bill Forge P. Ltd., no interest payable as assessee had reversed credit before utilisation.

Prepared by:- Monika Tak

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PJ/CASE LAW/2016-17/3043

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