2023 (6) TMI 368 - AT - Central Excise

Tribunal rules no interest on unutilized Cenvat credit; distinguishes taking vs. utilizing credit

M/s. National Aluminium Company Limited Versus Commissioner of Central Excise & Service Tax, Bhubaneswar-I

The Tribunal ruled in favor of the Appellant, finding no justification for imposing interest on inadvertently taken but unutilized Cenvat credit that was ... Levy of interest under Rule 14 of the Cenvat Credit Rules, 2004 (CCR) read with Section 11AB of the Central Excise Act, 1944 - amount of Cenvat credit taken inadvertently but not utilized - HELD THAT:- In the present facts of the case, the Appellant has asserted that it had sufficient credit balance in its account and also produced relevant statements evidencing the same. Further, the issue of interest on unutilized reversed credit entry was the subject matter before the Hon'ble Supreme Court in the case of UOI AND ORS. VERSUS IND-SWIFT LABORATORIES LTD. [2011 (2) TMI 6 - SUPREME COURT]. The decision was considered by Hon'ble Karnataka High Court in the case of COMMISSIONER OF CENTRAL EXCISE & SERVICE TAX LARGE TAXPAYER UNIT, BANGALORE VERSUS M/S BILL FORGE PVT LTD, BANGALORE [2011 (4) TMI 969 - KARNATAKA HIGH COURT], and it is only after consideration of the aforesaid decision of the Hon’ble Supreme Court it was held that in case the Cenvat credit taken is not utilized, no interest liability would arise. Hon'ble Punjab & Haryana High Court in the case of COMMISSIONER OF C. EX., DELHI-III VERSUS MARUTI UDYOG LIMITED [2006 (10) TMI 63 - PUNJAB & HARYANA HIGH COURT] held that the assessee is not liable to pay interest as the credit was only taken as an entry in the Modvat record and was not in fact utilized. Against the decision, the Special leave to Appeal filed by Revenue, was rejected by the Hon'ble Supreme Court COMMNR. OF CENTRAL EXCISE, DELHI-III VERSUS M/S. MARUTI UDYOG LTD. [2007 (5) TMI 307 - SC ORDER]. In the present case, since the Appellant had sufficient credit balances, there would be no loss of Revenue to the exchequer. Therefore, the imposition of interest in the present proceedings cannot sustain and hence, the impugned orders are set aside. Appeal disposed off. Issues Involved:The judgment involves the levy of interest under Rule 14 of the Cenvat Credit Rules, 2004 for inadvertently taken but not utilized Cenvat credit, and the interpretation of relevant legal provisions and precedents.Summary of the Judgment:Issue 1: Inadvertent Cenvat Credit and Interest LiabilityThe Appellant inadvertently took CENVAT Credit twice due to a clerical error, but promptly reversed the excess credit taken. The dispute arose regarding the levy of interest on the unutilized reversed credit. The Appellant contended that no interest was payable as the credit was not utilized, supported by relevant statements and legal precedents favoring their stance. The Revenue argued for interest payment based on Rule 14 of the CCR. The Tribunal considered the facts, relevant legal provisions, and precedents, including the Supreme Court and High Court decisions, to determine the interest liability.Issue 2: Legal Interpretation and PrecedentsThe Tribunal analyzed the legal provisions, including the amendment to Rule 14 of the CCR, which substituted 'taken or utilized' with 'taken and utilized.' It referred to the decision in the case of Union of India vs. Ind-Swift Laboratories Ltd. and subsequent judgments to interpret the liability for interest on unutilized Cenvat credit. The Tribunal distinguished the Revenue's reliance on a specific case and highlighted the legislative intent behind the rule amendment. It also cited cases like CCE Vs. Maruti Udyog Ltd. and CCE Vs. M/s Strategic Engineering (P) Ltd. to support the position that interest is not payable when credit is not utilized and subsequently reversed.Conclusion:Considering the Appellant's sufficient credit balance, the Tribunal concluded that no loss to the Revenue occurred, and therefore, the imposition of interest was unjustified. Relying on precedent decisions and the legislative intent behind the rule amendment, the Tribunal set aside the impugned orders, ruling in favor of the Appellant. The judgment emphasized the distinction between taking and utilizing Cenvat credit, leading to a revenue-neutral outcome when credit is not utilized and reversed promptly.This summary encapsulates the key aspects of the judgment, including the issues involved, arguments presented by both parties, legal interpretation, relevant precedents, and the final decision rendered by the Tribunal.