Tribunal overturns penalties for irregular CENVAT credit on Construction and Renting Services

The Tribunal allowed the appeal, setting aside the order imposing interest and penalty on irregularly availed CENVAT credit for 'Construction Service and Renting Service.' Relying on precedents, the Tribunal held that reversing the credit before utilization exempts the assessee from interest and penalty liabilities. The judgment was delivered on 6th October 2017 by Shri S.S. Garg, Judicial Member of the Appellate Tribunal CESTAT Bangalore.

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Issues:
1. Availing of CENVAT credit on 'Construction Service and Renting Service'.
2. Liability to pay interest and penalty on irregularly availed credit.
3. Applicability of judicial precedents on the issue.

Analysis:
Issue 1: The appeal was against the rejection of the appellant's appeal by the Commissioner (A) regarding the irregular availing of CENVAT credit on 'Construction Service and Renting Service'. The appellants had wrongly availed credit amounting to Rs. 15,73,486 on services not falling under the definition of input service. The original authority confirmed the demand along with interest and penalty, which was upheld by the Commissioner (A).

Issue 2: The appellant argued that they had availed the credit on a bona fide belief of its availability but had not utilized it, reversing the credit before the show-cause notice was issued. They contended that they should not be liable to pay interest since the credit was not utilized. Citing judicial precedents, the appellant claimed that the liability for interest and penalty does not arise if the credit is reversed before utilization, as established in various court decisions and a Tribunal ruling, including the case of Commissioner of Central Excise vs. Bill Forge Pvt. Ltd. and CCE vs. Strategic Engineering Pvt. Ltd.

Issue 3: The Tribunal, after considering the arguments and precedents cited by the appellant, concluded that the impugned order was not sustainable in demanding interest and penalty. Relying on the decisions mentioned, the Tribunal allowed the appeal by setting aside the order concerning interest and penalty, aligning with the interpretation that reversing the credit before utilization exempts the assessee from interest and penalty liabilities. The judgment was delivered on 6th October 2017 by Shri S.S. Garg, Judicial Member of the Appellate Tribunal CESTAT Bangalore.

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