Whether interest is payable on reverse of credit which is wrongly taken CENVAT credit by appellant on input used in production of exempted product before utilization of the credit?

PJ/Case Law/2013-14/1679

Case:-PEARL INSULTATIONS PVT. LTD. Versus COMMISSIONER OF C. EX., BANGALORE

Citation:-2013 (29) S.T.R.640 (Tri.-Bang.)

Brief facts:-After hearing both sides on merits of the case on the stay petition, Tribunal found that the appeal itself could be disposed off at this juncture since the issue involved is in narrow compass. After allowing the stay petition for waiver of pre-deposit of amount, the appeal was taken up for disposal.

Brief of facts is that demand of interest has arisen on the ground that the appellant has availed Cenvat credit on the inputs which were used in production of exempted as well as dutiable products. Ld. Counsel brings to our notice that the appellant has reversed the entire amount attributable to the credit taken which were utilized in exemption products. He also brings to our notice that the fact that the appellant has not utilized the amount which were sought to be reversed by the Department. He specifically takes up through the findings of Adjudicating Authority which has been upheld by the ld. Commissioner (Appeals). He would also brings to our notice the judgment of the Hon’ble High Court of Ind-Swift Laboratories Ltd. v. UOI [2009 (240)E.L.T.328 (P & H)].

Appellant contention:-The appellant has submitted that he has reversed the entire amount attributable to the credit taken which were utilized in exemption products before utilization of the credit and hence, interest is not leviable on them.

Respondent contention:-Ld. DR on the other hand would submit that the liability to interest would arise where the Cenvat credit has been taken wrongly but reversed by the assessee before utilization of the credit. He would submit that the Cenvat credit has been wrongly taken and Board’s Circular 3-9-2009 will be applicable in full and the appellant is required to pay interest as adjudged by the lower authorities.

Reasoning of judgment:-We have considered the submission from both parties and perused the record, we find that the Hon’ble High Court of P & H in the case of Ind-Swift Laboratories Ltd. (supra) examined the provisions of Rules which was relied upon by the ld. DR in the Judgment in para-11, which we respectfully reproduce below :-

“11. Reliance of respondents on Rule 14 of the Credit Rules that interest under Section 11AB of the Act is payable even if CENVAT credit has been taken. In our view, said clause has to be read down to mean that where CENVAT credit has been taken and utilized wrongly, interest should be payable on the Cenvat credit taken and utilized wrongly. 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. On a co-joint reading of Section 11AB of the Act and that of Rules 3 and 4 of the Credit Rules, We hold that interest cannot be claimed from the date of wrong availment of CENVAT credit. The interest shall be payable from the date CENVAT credit is wrongly utilized.”

Since the law is not settled by the Hon’ble High Court of P&H in the assessee’s favour, we, respectfully following the same, set aside the impugned order and allow the appeal filed by the assessee. Stay petition is also disposed off.

Decision:-Appeal allowed.

Comment:-The issue under consideration is a matter of dispute since the adverse decision given in the case of Ind-Swift Laboratories holding that interest is payable from the date of taking cenvat credit. However, this decision of Apex Court has been distinguished by the High Court in the case of Bill Forge Pvt. Ltd. wherein it has been opined that interest is payable from the date of its utilisation and not availment. However, the position is cleared in the present scenario whereby interest is payable from the date of utilisation of cenvat credit.

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PJ/Case Law/2013-14/1679

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