Tribunal upholds interest on Cenvat credit for Outdoor Catering Services

The tribunal set aside penalties imposed on the appellant but upheld the demand for interest on Cenvat credit availed on service charges for Outdoor Catering Services. The tribunal found the appellant liable to pay interest from the date of taking credit until any reversal was made, based on Rule 14 of the Cenvat Credit Rules, 2004. The decision was pronounced on 03.09.2021.

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Issues involved:
Whether the appellant is liable to pay interest on Cenvat credit availed on service charges collected from employees for Outdoor Catering Services and whether the appellant is liable to penalty.

Analysis:
The appellant contended that the Cenvat credit was availed under a bonafide belief and subsequently reversed, arguing that interest and penalty should not be charged as the credit was not wrongly taken. The appellant cited various judgments in support of this argument. On the contrary, the revenue representative emphasized that interest on Cenvat credit had been settled by the Supreme Court in a previous case, making the cited judgments by the appellant's counsel distinguishable. The revenue representative also presented several judgments to support their stance.

The tribunal carefully considered both arguments and examined the issue of Cenvat credit availed on Outdoor Catering Services where a portion of the service charges was contributed by employees, which was deemed non-Cenvatable. The tribunal noted that this issue had been conclusively settled by the Bombay High Court in a previous case. Consequently, the tribunal found no malafide intention on the part of the appellant and set aside the penalty imposed.

Regarding the levy of interest on the Cenvat credit, the tribunal determined that since the credit on service charges borne by employees was non-Cenvatable, the credit taken by the appellant was considered wrongly taken. Referring to Rule 14 of the Cenvat Credit Rules, 2004, the tribunal held that interest was chargeable from the date of taking credit until any reversal was made. Despite conflicting judgments cited by both parties, the tribunal relied on a Supreme Court judgment which interpreted Rule 14 to mandate interest in cases of both credit taken and utilized. The tribunal emphasized the binding nature of the Supreme Court's decision over lower court judgments, concluding that the appellant was indeed liable to pay interest.

In the final decision, the tribunal set aside the penalties imposed on the appellant but upheld the demand for interest. The appeals were partly allowed, with the judgment pronounced on 03.09.2021.

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