2019 (2) TMI 1232 - AT - Central Excise

Tribunal overturns recovery order for cenvat credit, interest, and penalty due to lack of intent

M/s. Caparo Fasteners (A Unit of Caparo Engineering India Ltd.) Versus CCE & ST, Jaipur-I

The Tribunal allowed the appeal, setting aside the order confirming the recovery of wrongly availed cenvat credit, interest, and penalty. It was held that ... Demand of Interest u/r 14 of Cenvat Credit Rules, 2004 - Excess availed CENVAT Credit on imported goods reversed - Rule 3 (i) of CCR, 2004 - Held that:- The interest liability under Rule 14 of Cenvat Credit Rules, 2004 if read with Section 11B of the Central Excise Act, 1944, is applicable when there is delay in payment of duties. The provisions make it clear that no liability to pay duty arises at the time of availment of cenvat credit. It arises only at the time of utilization thereof. Thus, it becomes clear that where the credit has wrongly been availed but has been reversed prior it being utilized by the assessee, no question of any interest liability at all arises. Hon’ble Apex Court in the case of Commissioner, Excise, Mumbai vs. Bombay Dyeing and Manufacturing Co. Ltd. [2007 (8) TMI 2 - SUPREME COURT] has held that where the entry has been reversed before utilization thereof, it amounts to not taking of the credit. Hence, the question of payment of interest does not at all arise. Time Limitation - Held that:- The Department was entitled to invoke the proviso thereof to have the extended period of limitation, but only in the case where there is any apparent act on the part of the appellant to evade the payment of duty/interest - But present is the case of voluntary reversal of the cenvat credit, that too, before utilization thereof. Question of any malafide intent or the mensrea to evade the duty does not at all arise - invocation of extended period was not justified on the part of the Department. Appeal allowed - decided in favor of appellant. Issues:1. Availing excess cenvat credit on imported goods.2. Failure to deposit interest amount.3. Show cause notice for recovery of cenvat credit, interest, and penalty.4. Appeal against confirmation of recovery.5. Voluntary reversal of cenvat credit.6. Liability to pay interest.7. Applicability of extended period of limitation.Analysis:Issue 1: Availing excess cenvat credit on imported goodsThe appellant was found to have availed excess cenvat credit amounting to Rs. 13,59,267 on imported goods in contravention of Rule 3 (i) of CCR, 2004 during February 2008. The Department issued a show cause notice for recovery of the amount along with interest and penalty.Issue 2: Failure to deposit interest amountAlthough the appellant reversed the excess cenvat credit, they failed to deposit the interest amounting to Rs. 1,74,284, leading to a contravention of CCR, 2004 and Section 11 AB of Central Excise Act, 1944.Issue 3: Show cause notice for recoveryA show cause notice was served proposing the recovery of the wrongly availed cenvat credit, interest, and penalty. The proposal was confirmed initially, and an appeal was filed against it.Issue 4: Appeal against confirmation of recoveryThe appeal was filed against the confirmation of the recovery by the Commissioner (Appeals), who rejected the appeal in the Order-in-Appeal.Issue 5: Voluntary reversal of cenvat creditThe appellant claimed that they voluntarily reversed the wrongly availed cenvat credit before the audit was conducted by the Department, arguing that no show cause notice should have been issued.Issue 6: Liability to pay interestThe Department contended that the appellant was liable to pay interest as the reversal of inadmissible credit was not voluntary but done at the instance of the audit. The question of interest liability arose under Rule 14 of Cenvat Credit Rules, 2004 and Section 11B of the Central Excise Act, 1944.Issue 7: Applicability of extended period of limitationThe Tribunal held that the appellant's reversal of cenvat credit before utilization, without any malafide intent to evade duty, did not justify the invocation of the extended period of limitation by the Department. The order under challenge was set aside on this ground, and the appeal was allowed.