2020 (2) TMI 395 - AT - Central Excise

Appellate Tribunal orders recalculation of interest on CENVAT credit, stresses adherence to legal provisions

HIL Ltd. Versus The Commissioner of Central Tax

The appeal was disposed of by the Appellate Tribunal directing the original authority to recalculate interest on CENVAT credit in accordance with ... Demand of Interest - CENVAT Credit “taken and utilised wrongly” instead of “taken or utilised wrongly” - HELD THAT:- It is true that the order of the Tribunal in the first round of litigation was not challenged by the appellant. This order had set aside the penalties and confirmed the demand partly to the extent of ineligible CENVAT credit on MS items used for shed amounting to ₹ 14,06,621/- along with interest. The order does not specify the manner in which the interest should be calculated or the period for which interest should be levied - There is no indication that the interest should be calculated up to 31st January 2013. There is also no indication in the order that the interest should be calculated only up to 16th March 2012. A plain reading of this order, therefore, shows that it was left to the lower authority to calculate interest as applicable under the Law. The interest must be calculated as per law i.e. up to 16th March 2012 only in respect of CENVAT credit which has been taken but not utilised and thereafter only if CENVAT credit has been taken and also utilised - in respect of CENVAT credit which has been taken but not utilised and it should be calculated beyond this period only in respect of CENVAT credit which has been taken and also utilised. The appeal is remanded to the original authority for the limited purpose of this computation. Issues involved: Calculation of interest on CENVAT credit, interpretation of Rule 14 of CENVAT Credit Rules 2004, determination of period for interest calculation, challenge against CESTAT orderAnalysis:1. The appeal before the Appellate Tribunal CESTAT Hyderabad was regarding the demand of interest on an amount confirmed by the Tribunal in a previous order. The appellant contested the interest calculation on the amount of Rs. 14,06,621/-, specifically related to CENVAT credit on MS items used for construction. The appellant argued that interest should not be levied on the amount as they had maintained a sufficient balance of CENVAT credit and had not utilized it after a certain amendment in Rule 14 of CENVAT Credit Rules 2004. The lower authorities had calculated interest up to 31st January 2013, which the appellant disputed, leading to the current appeal.2. The first appellate authority had upheld the interest calculation, stating that it was done in compliance with the previous order of CESTAT, and any challenge against it should have been raised appropriately. The appellant's failure to appeal or modify the CESTAT order was highlighted as a reason for not altering the interest calculation.3. Upon reviewing the arguments and records, the Member (Technical) of the Tribunal observed that the previous order did not specify the manner or period for interest calculation, leaving it to the lower authorities to determine. The Member noted that the interest should be calculated as per law, i.e., up to 16th March 2012 for CENVAT credit taken but not utilized, and beyond that date if the credit was both taken and utilized. Lack of clarity in the records regarding the utilization of CENVAT credit during the relevant period led to the decision to remand the appeal to the original authority for proper computation based on the specified criteria.4. The final decision disposed of the appeal by directing the original authority to recalculate the interest in accordance with the specified guidelines: interest up to 16th March 2012 for credit taken but not utilized, and beyond that date for credit taken and utilized. The judgment emphasized the importance of adhering to legal provisions and ensuring proper computation based on the specific circumstances of CENVAT credit utilization.5. The judgment provided a detailed analysis of the issues related to interest calculation on CENVAT credit, interpretation of relevant rules, and the necessity for clarity in orders to guide lower authorities in determining interest amounts accurately. The decision to remand the appeal for proper computation underscored the significance of following legal procedures and ensuring precise application of rules in tax matters.