24 June 2024


Customs, Excise and Service Tax Appellate Tribunal

Ambika Cotton Mills Ltd vs. Commissioner of GST & Central Excise




When the assessee has not taken the benefit of the CENVAT credit, there is no liability to pay interest

The Appellants are manufacturers of cotton yarn which they are clearing on payment of duty under Notification No. 29/2004-CE and also availing full exemption under Notification No. 30/2004-CE both dated 9th July, 2004. They are availing CENVAT credit facility under Rule 3 of CENVAT Credit Rules, 2004 on inputs, capital goods and service tax paid on input service and utilizing the same in the manufacture of both exempted and dutiable goods.

On verification of CENVAT credit documents, it was noticed that, the Appellant had not reversed the proportionate input credit relating to the exempted goods cleared every month properly during the periods from November 2007 to January 2011 and from November 2008 to December 2010 as required under erstwhile Rule 6(3)(a) and Rule 6(3)(ii) of CENVAT Credit Rules and on being pointed out by the officers of Central Excise, the Appellant accepted the liability and reversed the ineligible CENVAT credit of Rs.58,965 availed on inputs. However, the appellant did not pay the interest on the wrongly availed CENVAT credit.

Hence, Show Cause Notices were issued proposing to recover the interest amount and for imposition of penalty under Section 11AC of the Act. The adjudicating authority confirmed the demands of interest amount of Rs. 25,025 and Rs. 64,668 respectively and imposed penalty of Rs.58,965 and Rs. 4,26,217 under Rule 15(2) of CENVAT Credit Rules, 2004 read with Section 11AC of the Central Excise Act. In appeal, Commissioner (Appeals) upheld the orders.

The appellant's claim that sufficient balance was available in CENVAT Credit account to reverse the credit and no pecuniary benefit was derived in any manner has not been contested by Revenue. Under the CENVAT credit scheme, there was no co-relation of the raw material and the final product, and the manufacturer is entitled to use the credit at any time thereafter when making payment of excise duty on the excisable product. The government has not been deprived of duty on the date, it became due as sufficient credit was available to take care of the debits made even without taking the disputed credit into account.

The Hon'ble High Court of Karnataka in Commissioner of Central Excise & Service Tax, LTU, Bangalore vs. Bill Forge (P.) Ltd. has examined the judgment of the Supreme Court in Union of India vs. Ind-Swift Laboratories Ltd. and distinguished the same. High Court held that, when the assessee has not taken the benefit of the CENVAT credit, there is no liability to pay interest. Once the credit entry was reversed, it is as if the CENVAT credit was not available. In the light of the law as stated in the judgment, no interest is payable in the circumstances and the question of imposition of a penalty does not arise. The impugned orders are hence set aside. Appeals allowed.

Tags : Interest Penalty Legality

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