Cenvat credit reversed before utilisation: no interest payable and penalty fails absent proven suppression.
Where Cenvat credit wrongly availed is reversed before utilisation, interest is not payable because reversal itself neutralises the credit before any use. On penalty, suppression of facts was not established, particularly where the interest issue had been subject to conflicting judicial views and the assessee was a public sector undertaking. The penalty was therefore not sustainable and was set aside. The assessee obtained full relief from both interest and penalty.
Issues: (i) whether interest was payable on Cenvat credit wrongly availed but reversed before utilisation; (ii) whether penalty could be sustained on the ground of suppression of facts.
Issue (i): whether interest was payable on Cenvat credit wrongly availed but reversed before utilisation.
Analysis: The disputed credit attributable to township and hospital services had been reversed by the assessee before its utilisation. The question of interest on wrongly availed credit reversed without utilisation had already been settled by judicial decisions, which treated reversal before utilisation as sufficient to deny interest liability.
Conclusion: Interest was not payable; the finding was in favour of the assessee.
Issue (ii): whether penalty could be sustained on the ground of suppression of facts.
Analysis: The issue on interest had been the subject of conflicting views in judicial decisions and stood settled only later. In these circumstances, and having regard to the assessee's status as a public sector undertaking, the element of deliberate suppression was not established.
Conclusion: The penalty was not sustainable and was set aside; this issue was decided in favour of the assessee.
Final Conclusion: The assessee was held not liable for interest on the reversed credit and the penalty was set aside, resulting in full relief.
Ratio Decidendi: Where Cenvat credit wrongly availed is reversed before utilisation, interest is not payable and penalty cannot be sustained in the absence of established suppression of facts.
TaxTMI 
AI Drafter ✕
TaxTMI 
