Appeal Allowed: Interest & Penalty Not Imposable on Reversed Credits

The appeal was allowed as it was established that interest and penalty are not imposable when wrongly availed credit has been reversed before utilization, citing precedents and Tribunal decisions. The impugned order rejecting the appeals and imposing interest and penalty was set aside, with the appellant granted consequential relief.

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Issues:
Appeal against rejection of appeals by Commissioner (A) - Excess CENVAT credit availed irregularly - Liability to pay interest and penalty.

Analysis:
The appellant filed two appeals against orders dated 30.12.2013 by the Commissioner (A) rejecting their appeals. The common issue in both appeals was the irregular availing of excess CENVAT credit. The Department found that the appellant had availed excess credit twice on the same input document, totaling Rs. 17,75,466, irregularly in their CENVAT Credit account. The Department issued a show-cause notice, leading to an Order-in-Original confirming the demand, interest of Rs. 5,22,323 under Section 11AB, and imposing a penalty of Rs. 17,75,466 under Rule 15(2) of CENVAT Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944. The appellant appealed to the Commissioner (A), who upheld the Orders-in-Original.

Upon hearing both parties, it was noted that the issue had been settled in favor of the appellant by the decisions of the Hon'ble Karnataka High Court and other cases. It was established that interest and penalty are not imposable when wrongly availed credit has been reversed before utilization. The appellant cited precedents where similar demands for interest and penalties were set aside. The Larger Bench of the Tribunal also held that interest liability does not arise if the availed credit is reversed before utilization.

In light of the precedents and the decision of the Larger Bench, it was concluded that no interest was demandable from the appellant, and no penalty could be imposed. Therefore, the impugned order was set aside, and the appeal was allowed with any consequential relief. The operative portion of the order was pronounced in Open Court on 13/09/2017.

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