2009 (2) TMI 197 - AT - Central Excise

Tribunal upholds interest demand on Cenvat credit irregularity without Show Cause Notice

The Tribunal affirmed the demand of interest for the delay in reversing Cenvat credit irregularly availed in 2004 and 2005, without issuing a Show Cause ... Interest on Reversal of Cenvat Credit – Delay in reversal of irregular cenvat credit – held that - The amendment to Section 11AB of the Act and the reading of Section 11AC by the Apex Court in UOI v. Dharamendra Textile Processors [2008 -TMI - 31520 - SUPREME COURT have made the ratio of these earlier decisions irrelevant to decisions made since. This Tribunal had held that payment of arrears before issue of Show Cause Notice did not affect the assessee’s liability to pay interest. Issues:1. Demand of interest for delay in reversing Cenvat credit irregularly availed in 2004 and 2005 without issuing a Show Cause Notice.2. Applicability of interest under Section 11AB when duty is paid voluntarily before the issuance of a Show Cause Notice.Analysis:Issue 1: The impugned order affirmed the demand of interest amounting to Rs. 33,662 for the delay in reversing Cenvat credit irregularly availed in 2004 and 2005. The appellants contended that no notice was issued before demanding interest. The Consultant for the appellants relied on a decision of a Single Member of the Tribunal in a previous case. However, the ld. SDR relied on a different Tribunal decision mandating the recovery of wrongly taken Cenvat credit along with interest as per Rule 12 of the Cenvat Credit Rules, 2002.Issue 2: The lower appellate authority affirmed the demand of interest without issuing a Show Cause Notice, citing observations of the Apex Court in a previous case. The judgment highlighted that interest accrual is automatic, and no separate notice of demand is required for the same. The Tribunal referred to previous decisions overruling cases where penalty or interest was not payable if tax due was paid before the issuance of a Show Cause Notice. The Tribunal held that the amendments to Section 11AB and the interpretation of Section 11AC by the Apex Court made the earlier decisions irrelevant. The Tribunal further stated that the payment of arrears before the issuance of a Show Cause Notice does not impact the liability to pay interest.In conclusion, the Tribunal dismissed the appeal, stating that the impugned order did not warrant interference based on the legal precedents and interpretations provided. The judgment emphasized the automatic accrual of interest and the irrelevance of previous decisions due to subsequent legal amendments and court interpretations.