2017 (5) TMI 668 - AT - Central Excise

Tribunal overturns decision on interest & penalty for irregular credit, stresses factual verification in tax.

Tecumseh Products India Pvt. Ltd. Versus Commissioner of Customs, Central Excise and Service Tax Hyderabad-IV

The Tribunal set aside the original authority's decision confirming interest and penalty on irregularly availed credit, remanding the case for ... Interest - penalty - whether the appellants are liable to pay interest and penalty when the irregularly availed credit has been reversed before utilisation? - Held that: - the appellants though have reversed the credit, it is not brought out from the records whether they had sufficient balance during the relevant time - The original authority is directed to verify whether the appellant has sufficient balance in the CENVAT credit account during the relevant time of taking the credit till the reversal of credit - appeal allowed by way of remand. Issues:Confirmation of interest and penalty on irregularly availed credit reversed before utilization.Analysis:The appellant, engaged in manufacturing hermetically sealed compressors, wrote off obsolete items valuing at Rs. 1,03,08,653/- in 2008-09, taking CENVAT credit of Rs. 19,98,868/-. Upon correction, a show-cause notice was issued for irregular credit availment, demanding interest of Rs. 3,04,353/- and imposing a penalty. The original authority confirmed interest and imposed a penalty of Rs. 3 lakhs. The appellant appealed, contesting only interest and penalty. The appellant reversed the credit before utilization, claiming no liability for interest and penalty. The Commissioner(Appeals) upheld the interest demand and modified the penalty. The appellant cited relevant judgments to support their case. The Department argued that the appellant's balance at the time of credit reversal was not verified. The Tribunal noted that the issue was settled by previous judgments but directed the original authority to verify the appellant's balance during credit reversal. The impugned order was set aside, and the appeal was allowed for verification purposes. If the appellant had sufficient balance, they would not be liable for interest and penalty, as per the cited judgments.This judgment highlights the importance of verifying the appellant's balance during credit reversal to determine liability for interest and penalty. The Tribunal emphasized the need to assess the appellant's CENVAT credit account balance at the relevant time. The decision to remand the case for verification ensures a fair assessment of the appellant's liability based on their balance during credit reversal. The judgment clarifies that if the appellant had sufficient balance, they would not be liable for interest and penalty, aligning with previous legal precedents. The case underscores the significance of factual verification in determining tax liabilities, emphasizing adherence to legal principles and precedents in tax matters.