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Subject News *  GST summons: anticipatory bail maintainable without arrest order, but relief denied in evasion case: Allahabad High Court. *  GST Appeal can’t be decided without hearing taxpayer’s objections to fresh evidence: Allahabad High Court. *  GST ITC can’t be reversed merely because supplier grants discount without reducing tax liability: GSTAT. *  Mere quoting of GST provision is not a valid charge: GSTAT quashes ITC denial. *  Personal hearing mandatory before adverse GST order, even without taxpayer’s request: Rajasthan High Court. *  Parallel bail pleas without full disclosure amount to abuse of process Rs. 43.08 crore GST case sent for fresh hearing: Supreme Court. *  GST refund based on unchallenged advance ruling can’t be recovered using later circular: GSTAT. *  Payment of GST alone doesn’t end interest and penalty liability when tax and interest remain unpaid beyond 30 days of notice: GSTAT. *  GST demand over builders’ 80% procurement rule requires reasoned adjudication: GSTAT. *  Eligible ITC doesn’t automatically entitle taxpayers to compensation cess refund on domestic sales: GSTAT. *  GST confiscation order passed before reply deadline invalid: GSTAT. *  GST interest can’t be retained after tax refund on delayed export receipts: Punjab & Haryana High Court. *  GST appeal can’t be dismissed over pre-deposit shortfall without opportunity To respond: Bombay High Court. *  DGGI SCN can’t be challenged before reply and adjudication:Chhattisgarh High Court. *  GST input tax credit can’t be denied solely due to supplier’s retrospective registration cancellation: GSTAT. *  GST notice must explain fraud allegations; merely repeating section 74 Is not enough:  Himachal Pradesh High Court. *  Audit detection alone can’t justify GST fraud penalty; specific suppression must be proved: GSTAT. *  GST order uploaded only under ‘Additional Notices’ tab without separate intimation set aside: Calcutta High Court. *  Service Tax appeal can’t be rejected for missing pre-deposit proof when payment is already recorded: CESTAT. *  SGST dept. can’t hear appeal against CGST order: Calcutta High Court. *  Mere dispatch of tax order can’t prove service or make appeal time-barred: CESTAT. *  Dealer incentives can’t be taxed merely on ledger entries: CESTAT. *  DGFT orders quashed for failure to supply DRI letter relied upon in SCN: Bombay High Court. *  GST penalty u/s 122(1A) can’t apply to Pre-2021 transactions; unregistered beneficiaries also covered: Delhi High Court. *  Expired E-way bill caused by wrong PIN code can’t justify GST penalty without intent to evade tax: GSTAT. *  Used railway rails can’t be taxed as track material without proof they are fit for reuse: CESTAT. *  Earlier DGGI notice doesn’t bar separate GST demand on different issue: Delhi High Court. *  ITC dispute involves no question of law: GSTAT directs appeal to Vice-President. *  Earlier DGGI notice doesn’t bar separate GST demand On different issue: Delhi High Court. *  No E-way bill required for interstate goods movement in november 2017: GSTAT quashes detention and penalty.  

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PJ/Case Law/2014-15/2137

No interest and penalty if credit erroneously taken but not utilised.

Case:-THE CCE, MADURAI VERSUS M/s STRATEGIC ENGINEERING (P) LTD

Citation:- 2014-TIOL-466-HC-MAD-CX

Brief Facts:-The present Civil Miscellaneous Appeal has been directed against the Final Order passed in Final Order No. 808 of 2009, dated 03.07.2009 [2009-TIOL-1711-CESTAT-MAD] by the CESTAT.
The respondent herein is the manufacturer of fibre glass and some other products and entitled to utilise CENVAT credit facilities. During the relevant period, the respondent has taken CENVAT credit facilities erroneously and the same has been reversed. Under the said circumstances, the respondent is bound to pay interest and penalty and for the purpose of claiming the same, show-cause notice dated 06.01.2005 has been issued. The demand made in the show-cause notice has been upheld in Order-in-Original No. 37 of 2005. The Order-in­ Original has been challenged before the Commissioner of Appeals. The Commissioner of Appeals has partly set aside penalty and reduced it from Rs.1,20,000/- to Rs.10,000/- and subsequently an appeal has been preferred before the CESTAT.
The CESTAT, after considering the rival contentions put forth on either side, has allowed the appeal and thereby set aside the entire claim of the Department. Against the order passed by the CESTAT, the present Civil Miscellaneous Appeal has been filed at the instance of the Department as appellant.
At the time of admitting the present Civil Miscellaneous Appeal, the following substantial questions of law have been settled for consideration:‑
"1. Whether interest is recoverable or not from the manufacturer in terms of Rule 12 of erstwhile CCR, 2002, and Rule 14 of CCR, 2004 when the CENVAT Credit has been taken wrongly by the manufacturer but kept unutilized, when the said Rules specifically state that where the CENVAT credit has been taken or utilized wrongly or has been erroneously refunded, the same along with interest shall be recovered from the manufacturer?
2. Whether penalty is imposable or not on the manufacturer in terms of Rule 13 of erstwhile CCE, 2002 and Rule 15 of CCR, 2004 when the CENVAT credit has been taken wrongly, when the said rules specifically state that if any person, takes CENVAT credit in respect of input or capital goods, wrongly or contravenes any of the provisions of these rules in respect of any input or capital goods, then, all such goods shall be liable to confiscation and such person, shall be liable to a penalty not exceeding the duty on the excisable goods in respect of which any contravention has been committed, or ten thousand rupees (as it stood at the material time), whichever is greater?"
The short point involved in the present Civil Miscellaneous Appeal is as to whether a mere taking of CENVAT credit facilities without actually using it, would carry interest as well as penalty?
The Appellate Tribunal has come to a definite conclusion to the effect that in the instant case the assessee has merely taken CENVAT credit facilities and before utilising the same, the Department has reversed it and therefore, the assessee is not liable to pay interest and penalty.
The learned counsel appearing for the appellant has contended elaborately that the reasoning given by the Appellate Authority for setting aside the order passed by the Authority is totally baseless by the Appellate Authority is liable to be set aside.

Appellant contentions:-The entire argument put forth on the side of the appellant/Department is based upon decision reported in 2012 (25) S.T.R. 184 (SC) (Union of India Vs. Ind-Swift Laboratories Limited) - 2011- TIOL-21-SC-CX, wherein the Apex Court has given a finding to the effect that in Rule 14 of Cenvat Credit Rules, 2004 it has been clearly mentioned three stages, known as taken or utilisation of erroneous refund. In the instant case, the first limb of Rule 14 of the said Rules is applicable and therefore, the assessee is bound to pay interest as well as penalty. The Honourable Apex Court has dealt with Rule 14 of the said Rules and subsequently on the basis of facts available in that case has given a finding to the effect that assessee therein is liable to pay interest as well as penalty.
 
Respondent contentions:-The learned counsel appearing for the respondent has contended that the decision reported in 2012 (25) S.T.R. 184 (SC) (Union of India) Vs. Ind-Swift Laboratories Limited) 2011-TIOL-21- SC-CX has been elaborately dealt with in the decision reported in 2012 (26) S.T.R. 204 (Karnataka) (Commissioner of Central Excise & S.T Bangalore Vs. Bill Forge Private Limited) -2011-TIOL-799-HC-KAR-CX.
In fact, this Court has perused the entire decision reported in 2012 (26) S.T.R. 204 (Karnataka) (Commissioner of Central Excise & S.T Bangalore Vs. Bill Forge Private Limited) - (2011-TIOL-799-HC-KAR-CX)  and ultimately found that mere taking of CENVAT credit facilities is not at all sufficient for claiming of interest as well as penalty.
 
Reasoning of Judgment:-It is an admitted fact that Rule 14 of the Cenvat Credit Rules has been subsequently amended, wherein it has been clearly stated as "taken and utilised". Therefore it is quite clear the mere taking itself would not compel the assessee to pay interest as well as penalty. Further, as pointed out earlier, the subsequent amendment has given befitting answer to all doubts existed earlier. Since the subsequent amendment has cleared all doubts existed earlier in respect of Rule 14 of the said Rules, it is needless to say that the argument advanced by the learned counsel appearing for the appellant/Department is erroneous, whereas the argument advanced on the side of the respondent is really having merit and the substantial questions of law settled in the present Civil Miscellaneous Appeal are not having substance and altogether the present Civil Miscellaneous Appeal deserves to be dismissed.
In fine, this Civil Miscellaneous Appeal deserves dismissal and accordingly is dismissed without costs and the order passed in Final Order No. E/920/2006, dated 03.07.2009 is confirmed.

Decision:-Appeal is dismissed.

Comment:-The gist of this case is that the amendment in rule 14 of Cenvat Credit Rules wherein interest is leviable only if “Credit is taken and utilized” clearly settles the issue in favour of the assessee. It means that if the cenvat credit is only taken, it doesn’t create any interest and penalty obligation on the assessee. This view is also supported by Karnataka High Court judgment given in the case of Bill Forge Pvt. Ltd. after considering the decision given in the case of Ind Swift Laboratories Ltd.  

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