Cenvat Credit, interest and penalty: assessed invoices protected credit, and unutilized reversed credit did not attract interest or penalty.

Capital goods credit on aluminium tables was held allowable where the goods were received under excise invoices assessed under Chapter Heading 8537, because the recipient's authority could not re-open or alter the supplier's classification at the receiver's end. Interest on wrongly availed Cenvat credit was held not payable where the credit remained unutilized and was reversed before use, as interest is compensatory and arises only when inadmissible credit is actually used to defer duty. Penalty under Rule 13 of the Cenvat Credit Rules, 2002 read with section 11AC was also held unsustainable because the credit was not utilized, was reversed when pointed out, and no fraud, suppression, or intent to evade duty was established.

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Issues: (i) whether capital goods credit was admissible on aluminium tables and whether their classification could be re-opened at the recipient's end; (ii) whether interest was payable on wrongly availed Cenvat credit that had not been utilized; (iii) whether penalty under Rule 13 of the Cenvat Credit Rules, 2002 read with section 11AC of the Central Excise Act, 1944 was sustainable.

Issue (i): whether capital goods credit was admissible on aluminium tables and whether their classification could be re-opened at the recipient's end.

Analysis: The credit was taken on the strength of excise invoices showing the goods as assessed under Chapter Heading 8537. The recipient authority could not revise the classification and assessment adopted in the invoices at the receiver's end. Where the goods had been received under duly issued invoices and the assessment had not been shown to be invalid, the classification could not be altered by the jurisdictional authority over the recipient so as to deny credit.

Conclusion: The denial of capital goods credit on aluminium tables was not justified and the credit was allowed in favour of the assessee.

Issue (ii): whether interest was payable on wrongly availed Cenvat credit that had not been utilized.

Analysis: Interest is compensatory and becomes payable when duty liability is withheld by actual utilization of inadmissible credit. The credit in question remained unutilized in the assessee's account and was reversed before being used. On that basis, interest could not be demanded merely because the credit had been wrongly taken.

Conclusion: The interest demand was not sustainable and was vacated in favour of the assessee.

Issue (iii): whether penalty under Rule 13 of the Cenvat Credit Rules, 2002 read with section 11AC of the Central Excise Act, 1944 was sustainable.

Analysis: Penalty under the provision could be imposed only where wrong availment or utilization of credit occurred on account of fraud, wilful mis-statement, collusion, suppression of facts, or contravention with intent to evade duty. The assessee had not utilized the credit, had reversed it when pointed out, and the record did not establish intent to evade duty. In the absence of the necessary culpable conduct, the statutory conditions for penalty were not met.

Conclusion: The penalty was not sustainable and was set aside in favour of the assessee.

Final Conclusion: The appeal succeeded in full, the impugned order was set aside, and all disputed demands and penalties were vacated.

Ratio Decidendi: Credit taken on the basis of an assessed invoice cannot be denied by reclassifying the goods at the recipient's end, and interest or penalty on wrong Cenvat credit is not attracted unless the credit is utilized and the statutory ingredients of wrongful intent are established.

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