Interest on unutilized CENVAT credit not payable from mere availment; liability under Rule 14 starts on utilization HC held that interest on wrongly availed CENVAT credit is compensatory and arises only when tax is actually withheld beyond its due date. Following its ...
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Interest on unutilized CENVAT credit not payable from mere availment; liability under Rule 14 starts on utilization
HC held that interest on wrongly availed CENVAT credit is compensatory and arises only when tax is actually withheld beyond its due date. Following its earlier view, HC ruled that interest cannot be levied merely from the date of wrongful availment of credit if such credit remains unutilized in the CENVAT account. Liability to interest arises only from the date of actual utilization or wrongful taking resulting in short payment of duty. Consequently, the demand for interest from the date of mere availment was set aside, in favour of the assessee.
The High Court of Karnataka dismissed the Revenue's appeal challenging the Tribunal's order, which stated that no interest is payable when the Assessee reverses the entire amount of Cenvat credit used in exempted products. The Court held that interest is compensatory and is imposed on an assessee who withholds tax payment. Interest is payable from the date Cenvat credit is taken or utilized wrongly.
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