Tribunal Upholds Refund of Interest on Delayed Payment in Excise Case

The Appellate Tribunal CESTAT, Mumbai, upheld the Commissioner of Central Excise (Appeals) order granting a refund of interest to the respondents amounting to Rs. 3,86,274. The refund was claimed due to delayed payment resulting from the reversal of Cenvat credit on capital goods sent to job workers for further processing, which was found permissible under the Cenvat Credit Rules. The Tribunal held that as the capital goods were dispatched within the stipulated time limit and the credit reversed accordingly, no interest was payable. The appeal by the Revenue was rejected, and the respondents were deemed entitled to the refund of interest paid.

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Issues:
Claim for refund of interest due to delayed payment of Cenvat credit on capital goods installed outside the factory.

Analysis:
The Appellate Tribunal CESTAT, Mumbai, heard the appeal where the Revenue challenged the Commissioner of Central Excise (Appeals) order accepting the respondent's claim for a refund of interest amounting to Rs. 3,86,274 paid due to delayed payment by way of reversal of Cenvat credit of Rs. 22,68,279 taken on capital goods installed outside their factory. The respondents, who are manufacturers of motor vehicle parts, moved capital goods to their job workers for further processing, which was found permissible under Rule 4(5)(a) of the Cenvat Credit Rules, 2002. This rule allows Cenvat credit even if inputs or capital goods are sent to a job worker for processing, reprocessing, testing, repair, re-conditioning, or any other purpose. The Tribunal referred to Board's Circular No. 637/28/02-CX, dated 8-5-2002, which stated that capital goods may be sent to the job worker's premises for production of goods in terms of Rule 4(5). As the capital goods were dispatched within the 180 days limit provided in the Rule, and the reversal of credit took place accordingly, it was concluded that no interest is payable. Therefore, the respondents were rightfully held entitled to the refund of interest paid.

The Tribunal, based on the above discussion, upheld the impugned order and rejected the appeal. The judgment was dictated and pronounced in court by the Vice-President, Ms. Jyoti Balasundaram. The representation for the appellant was made by Shri Uma Shankar, SDR, while Shri M.H. Patil, Advocate, represented the respondent. The judgment was delivered by Jyoti Balasundaram, Vice-President, along with Shri K.K. Agarwal, JJ.

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