Tribunal clarifies interest on CENVAT credit starts from availing, not just utilization

The Tribunal ruled that interest on wrongly availed CENVAT credit accrues from the date of availing the credit, not just from its utilization, as clarified by a Supreme Court judgment. Consequently, penalties imposed on the assessees for not paying interest earlier were set aside. The appeals were partly allowed, upholding the interest liability already paid by the assessees but canceling the penalties.

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Issues:
- Whether interest on wrongly availed CENVAT credit is payable from the date of availing the credit or only from the date of its utilizationRs.
- Whether penalties imposed on the assessees for not paying interest on belated reversal of wrongly availed credit are justifiedRs.

Analysis:
The assessees, engaged in manufacturing motor car components, had taken CENVAT credit multiple times on the same input invoices. Upon detection by the department, they reversed the credit but did not pay interest on the belated reversal. Subsequently, show cause notices (SCNs) were issued for recovery of interest and imposition of penalties. The interest amounts were confirmed, and penalties were imposed by the Commissioner (Appeals), leading to appeals before the Tribunal.

During the hearing, the assessees argued that they had paid the interest amounts following a Supreme Court judgment in Union of India Vs Ind-Swift Laboratories Ltd., which clarified that interest on irregular credit accrues from the date of availing the credit, not just from its utilization. The Tribunal noted that a previous case, CCE Pondicherry Vs Superfil Products, had held that interest liability arises only upon credit utilization. The Supreme Court's decision in February 2011 established that interest liability starts from the date of availing irregular credit.

Considering the debatable nature of the issue before the apex court's ruling, the Tribunal concluded that the assessees cannot be penalized for not paying interest earlier. Therefore, the penalties imposed on the assessees were set aside. The appeals were partly allowed, upholding the liability to interest (already paid by the assessees) but canceling the penalties.

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