2019 (4) TMI 1686 - HC - Central Excise

Court affirms Tribunal decision on tax liability, holds amendment prospective, not retrospective.

Cipla Limited, Versus The Commissioner of Central Excise, Goa,

Cipla Limited, Versus The Commissioner of Central Excise, Goa, - 2019 (28) G. S. T. L. 427 (Bom.) Issues Involved:1. Demand of interest on incorrectly taken but not utilized Cenvat credit.2. Demand of interest on inadmissible Cenvat credit reversed without utilization.3. Prospective or retrospective application of the amendment to Rule 14 of Cenvat Credit Rules, 2004.4. Application of the Apex Court's decision in Ind-Swift Laboratories to the present facts.5. Imposition of penalty under Rule 15 of Cenvat Credit Rules, 2004.Detailed Analysis:Issue 1: Demand of interest on incorrectly taken but not utilized Cenvat creditThe court examined whether the Appellate Tribunal was justified in confirming the demand of interest on Cenvat credit that was incorrectly taken but not utilized. The court referred to Rule 14 of the Cenvat Credit Rules, 2004, which states that interest is recoverable when Cenvat credit is 'taken or utilized wrongly or has been erroneously refunded.' The court cited the Supreme Court's decision in Union of India vs. Ind-Swift Laboratories Ltd., which held that interest is payable if Cenvat credit is taken wrongly, regardless of its utilization. The court concluded that the Appellant was liable to pay interest even if the credit was not utilized.Issue 2: Demand of interest on inadmissible Cenvat credit reversed without utilizationThe court considered whether the Appellant was liable to pay interest on inadmissible Cenvat credit that was reversed without utilization. The court noted that the Appellant had taken credit on common inputs used for both excisable and non-excisable goods but did not reverse the credit for non-excisable goods until prompted by an audit. The court held that the Appellant's failure to reverse the credit initially constituted a contravention of the Cenvat Credit Rules, making them liable for interest under Rule 14.Issue 3: Prospective or retrospective application of the amendment to Rule 14 of Cenvat Credit Rules, 2004The court addressed whether the amendment to Rule 14 by Notification dated 17 March 2012, which changed 'taken or utilized wrongly' to 'taken and utilized wrongly,' applied retrospectively. The court held that the amendment was prospective and did not apply to the assessment years in question. The court emphasized that the demand notice was issued before the amendment, and thus, the Appellant could not benefit from the amended rule.Issue 4: Application of the Apex Court's decision in Ind-Swift Laboratories to the present factsThe court evaluated whether the decision in Ind-Swift Laboratories was applicable to the present case. The court found that the principles laid down in Ind-Swift Laboratories, which interpreted Rule 14 to impose interest on wrongly taken Cenvat credit regardless of utilization, were directly applicable. The court rejected the Appellant's argument that the facts of Ind-Swift Laboratories were different, affirming that the decision was relevant and binding.Issue 5: Imposition of penalty under Rule 15 of Cenvat Credit Rules, 2004The court examined the justification for imposing a penalty of Rs. 50,000 on the Appellant under Rule 15 of the Cenvat Credit Rules, 2004. The court noted that the Appellant had knowingly availed of Cenvat credit for inputs used in non-excisable goods and only reversed the credit after an audit. The court upheld the penalty, finding no infirmity in the orders passed by the Commissioner Customs and Central Excise and the CESTAT.Conclusion:The court dismissed the appeal, affirming the Tribunal's decision on all substantial questions of law. The Appellant was held liable for interest and penalty as per the provisions of the Cenvat Credit Rules, 2004, and the Central Excise Act, 1944. The court concluded that the amendment to Rule 14 was prospective and did not apply to the case, and the principles from Ind-Swift Laboratories were correctly applied.