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Corporate News *  Missing seized records must be considered while testing ITC claim; duplicate GST demands ordered corrected: Delhi High Court. *  GST appeal can’t be rejected without addressing taxpayer’s grounds: Allahabad High Court. *  Surplus IGST credit can offset CGST, SGST shortfall: GSTAT. *  GST refund can’t be denied when cancelled airfares are returned with tax: GSTAT. *  3 Hearing notices issued within 2 minutes: Gujarat High Court flags portal flaw, seeks report. *  GSTR-9, GSTR-9C filing for FY 2025-26 enabled; pending GSTR-1 and GSTR-3B must be filed first. *  Dupattas are exempt fabrics, can’t be taxed as fibres at 4%: Madras High Court. *  Full transitional credit allowed on capital goods received after GST rollout: GSTAT denies Rs. 6.99 lakh export duty credit. *  GST return mismatch alone can’t justify fraud proceedings: GSTAT orders fresh adjudication under section 73. *  Supplier found non-existent later can’t alone justify input tax credit denial: GSTAT. *  GST interest stops once tax reaches government account, can’t run until return filing: GSTAT. *  Cancelled flat booking- GST refund can’t be denied without excluding COVID period from limitation: GSTAT. *  India notifies rules of origin for India–New Zealand FTA. *  Incomplete E-bike kits classifiable as complete vehicles, but not eligible for CKD duty concession: CESTAT. *  Same GST rate on main input and output can’t by itself bar inverted duty refund: GSTAT. *  Unjust enrichment doesn’t apply to customs refunds from assessments finalised before July 13, 2006: Gujarat High Court. *  CENVAT credit can’t be denied solely because plant And machinery are embedded in earth: Karnataka High Court. *  DFIA exports ineligible for RoDTEP benefits; customs directs repayment with applicable interest. *  Second E-Way bill alone doesn’t prove another supply: GSTAT. *  Bail denied in Rs. 1.19 crore fake GST refund case over risk of accused absconding again: Punjab and Haryana High Court. *  GST registration can be restored after revocation deadline if outstanding dues are paid: Gauhati High Court. *  Multiple GST proceedings over same suppliers: Calcutta High Court directs dept. to share findings for adjudication. *  E-Governance portal services not OIDAR, fixed deposit interest not taxable: CESTAT. *  Rs. 500 Stamp duty required on authority letters for CAs, CMA and GST practitioners in Pune GST division.  *  Rs. 1.10 crore GST refund must be paid in cash after business closure: Allahabad High Court. *  Godown rent attracts 18% GST even when used exclusively for exempt agricultural warehousing: AAR. *  GST portal launches "Multi-State Registration" facility: one master TRN for registration applications across multiple States/UTs. *  RoDTEP scheme extended till 31st December, 2026.  *  Mere disagreement with order can’t override Rs. 20 lakh appeal limit: GSTAT. *  Customs interest can’t be backdated before confiscation liability is determined; nearly 8 year period excluded: Delhi High Court.
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 Laws/2011-12/1205

Whether Interest is to be paid on Cenvat credit wrongly availed but entry reversed before utilization

 
 
Case: -Commissioner of C.Ex & Cus., Vadadara – II V/S Dynaflex Pvt Ltd.
 
Citation: -2011 (266) E.L.T. 41 (GUJ.)
 
Issue: -Whether Interest is to be paid on Cenvat credit wrongly availed but entry reversed before utilization?
 
Brief Facts: - Respondent-assessee were engaged in the manufacture of Polybags/flat films falling under Chapter 39. They had wrongly availed Cenvat Credit which was observed during the course of audit. Consequently assessee reversed the said credit but failed to pay interest on the credit availed.
 
Department issued show cause notice for recovery of interest amount under Rule 14 of CCR, 2004 read with Section 11AB of the CEA, 1944. Show cause notice was later dropped and being aggrieved department filed appeal with the Commissioners (Appeal) who dismissed the appeal. Department preferred a second appeal before the Tribunal, who also dismissed the appeal. Department is now in appeal in High Court.
 
Appellant’s Contention: -Department contended that in the light of the provisions of Rule 14, the assessee was liable to pay interest on the credit taken wrongly, even if there was no mala fide intent on the part of the assessee. The express provision in respect of interest provided foe in Rule 14 cannot be disregarded. In the light of the said provisions, the Adjudicating Authority has no discretion to dwell upon such factors, that the wrongly taken credit was not utilized or that such credit was reversed voluntarily or that there was no mala fide intent on the part of the assessee, so as to absolve it from the responsibility of paying interest. Intention of legislature behind enacting such a provision is to discourage strictly the act of not only wrongly utilizing the credit but of wrongly taking credit as well.
 
It was also submitted that the Tribunal has failed to appreciate that there is no scope for ambiguity in text of Rule 14 and on literal interpretation, it is apparent that in both the cases, that is, whether the credit is wrongly taken or utilized, the department is required to effect the recovery of CENVAT credit along with interest. It was urged that if the restrictive interpretation adopted by the Adjudicating Authority is accepted for non chargeability of interest then no interest on erroneous credit taken can be made under said rule and such interpretation would make the provision purposeless and nugatory.
 
Respondent’s Contention: -Respondent placing reliance on judgment in the case of Maruti Udyog Ltd [2007 (214) E.L.T A–50] for the proposition that credit wrongly taken but not utilized does not amount to taking credit. That the Adjudicating Authority was of the view that taking credit of 100% duty amount was only a bonafide mistake which has been corrected by reversing the wrongly availed amount of credit. I the absence of evidence to establish mala fide intention on respondent’s part, imposition of interest is not warranted.
 
Reasoning of Judgment: -The High Court referred to the judgment of Apex Court in the case of Commissioners of   C. Ex Mumbai–I v/s Bombay Dyeing & Mfg Co. Ltd [2007 (215) E.L.T 3 (S.C.)] where in it was held that when an entry has been reversed before utilization the same amount to not taking credit. Rule 14 of the Rules makes provision for the recovery of interest where the CENVAT credit has been taken or utilized wrongly or has been erroneously refunded. Thus, in both cases where cenvat credit is wrongly taken or wrongly utilized, interest is recoverable under Rule 14. However, in the light of aforesaid decision of the Supreme Court, when the entry has been reversed before utilization, the same amounts to not taking CENVAT Credit. Accordingly, when no credit is taken, the provisions of Rule 14 would not be attracted. It was held that the view adopted by the Tribunal and Lower Authorities was in consonance with the view taken by the Supreme Court.
 
Decision: -Appeal dismissed.
 
Comments: - The above judgment shows consistent view maintained by courts that there is difference between availment of credit and utilization of credit and accordingly no interest is payable on availment of  credit if it is reversed even if the Rule 14 provides otherwise. But the Apex court in its latest case of Indo-shift has reversed the position and held that when the language of provision is crystal clear then there is no scope of any interpretation. The interest is payable from the date of taking credit.
 
 

 
 
 
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