2013 (3) TMI 86 - AT - Central Excise

Tribunal Upholds Interest Demand on CENVAT Credit, Emphasizes Apex Court's Interpretation

Dr. Reddy s Laboratories Ltd. Versus The Commissioner of Central Excise & Service Tax, Hyderabad

The Tribunal upheld the demand for interest under Rule 14 of the CENVAT Credit Rules 2004, emphasizing the binding nature of the apex court's ... Demand of interest u/r 14 of CCR 2004 r.w.s. 11AB of the Central Excise Act - assessee contested that CENVAT credit was merely taken by making an entry in the CENVAT account and reversed at a later point of time by making a debit entry before issuing SCN thus there would be no question of interest liability - Held that:- There is only one ruling that is applicable to the instant case and the same is the one handed down by the apex court after interpreting the provisions of Rule 14 in Ind-Swift Laboratories case [2011 (2) TMI 6 - SUPREME COURT]. The ruling is to the effect that the word or appearing between the words taken and utilized cannot be read as 'and' by way of reading it down as has been done by the High Court. The effect of this ruling is unambiguously clear. Where an amount of inadmissible CENVAT credit was taken by a manufacturer of excisable products or a provider of output service but later on reversed, he has to pay interest under Rule 14 for the period from the date of taking of credit to the date of its reversal, whether or not the credit was utilized. This is the clear result of the interpretation given by the apex court to the provisions of Rule 14. It is binding on this Tribunal under Article 141 of the Constitution of India. Thus the short question (whether the appellant is liable to pay interest under Rule 14 of the CCR 2004 on the amounts of CENVAT credit in question) has to be settled in favour of the Revenue. Issues:1. Liability to pay interest on inadmissible CENVAT credit.2. Interpretation of Rule 14 of the CENVAT Credit Rules 2004.3. Applicability of the doctrine of per incuriam to a judgment.Detailed Analysis:Issue 1: The appeal concerns the demand for interest of Rs. 57,784 raised under Rule 14 of the CENVAT Credit Rules 2004 read with Section 11AB of the Central Excise Act. The appellant argued that interest liability does not arise unless the credit is utilized for duty payment. The department issued a show-cause notice demanding interest for the period from credit to debit, which the appellant contested, stating the credit was reversed before the notice. The adjudicating authority confirmed the interest demand under Rule 14, leading to the appeal against the appellate authority's order.Issue 2: The appellant's challenge was based on the non-utilization and reversal of CENVAT credits before the notice. The appellant relied on a High Court judgment distinguishing the apex court's ruling in Ind-Swift Laboratories case. The Superintendent argued that the apex court's interpretation of Rule 14 binds all courts, emphasizing that the credit's utilization is distinct from taking credit, as per Rule 3 of the CCR 2004. The Superintendent contended that the High Court's decision in another case was contrary to the apex court's ruling and invoked the concept of per incuriam against it.Issue 3: The Tribunal analyzed the doctrine of per incuriam in light of the High Court's judgment, which ignored Rule 3 provisions while considering the implications of credit taking and utilization. The Tribunal found that the High Court's decision contradicted the clear provisions of Rule 3 and rendered Rule 14 meaningless. By applying the doctrine of per incuriam, the Tribunal concluded that the High Court's decision was flawed. The Tribunal held that the apex court's ruling interpreting Rule 14 was binding, requiring the appellant to pay interest on the inadmissible CENVAT credit, leading to the dismissal of the appeal.In conclusion, the Tribunal upheld the demand for interest under Rule 14, emphasizing the binding nature of the apex court's interpretation and rejecting the appellant's arguments based on non-utilization and reversal of credits. The application of the doctrine of per incuriam against the High Court's decision reinforced the Tribunal's decision in favor of the Revenue, resulting in the dismissal of the appeal.