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of <h1>Tribunal Rules No Interest Payment Required if CENVAT Credit Not Utilized, Aligning with Karnataka High Court Precedent.</h1> <h3>M/s. Ambika Cotton Mills Ltd. (Unit – IV) Versus Commissioner of GST & Central Excise, Madurai</h3> M/s. Ambika Cotton Mills Ltd. (Unit – IV) Versus Commissioner of GST & Central Excise, Madurai - TMI Issues involved: The issues involved in this case are related to the reversal of CENVAT credit, payment of interest on wrongly availed credit, and imposition of penalty under sec. 11AC of the Central Excise Act.Reversal of CENVAT credit and payment of interest: The appellants, manufacturers of cotton yarn, were availing CENVAT credit under Rule 3 of CENVAT Credit Rules, 2004. It was observed that they had not reversed the proportionate input credit relating to exempted goods cleared during certain periods. The appellant accepted the liability and reversed the ineligible CENVAT credit availed on inputs but did not pay the interest on the wrongly availed credit. Show Cause Notices were issued for recovery of interest amounts and imposition of penalty under sec. 11AC of the Act. The adjudicating authority confirmed the demands of interest amounts and imposed penalties. The Commissioner (Appeals) upheld the orders, leading the appellant to approach the Tribunal.Arguments and Decision: The appellant argued that there was a sufficient balance in the CENVAT Credit account to reverse the credit, and no pecuniary benefit was derived. They cited a judgment of the Hon'ble High Court of Karnataka in their favor. The Tribunal observed that under the CENVAT credit scheme, there was no co-relation of raw material and final product, and the manufacturer could use the credit at any time thereafter. It was noted that the government was not deprived of duty as sufficient credit was available to cover the debits even without considering the disputed credit. Referring to the judgment of the Hon'ble High Court of Karnataka, the Tribunal held that when the assessee did not utilize the CENVAT credit, there was no liability to pay interest. Consequently, the Tribunal set aside the impugned orders, allowing the appeals with consequential relief.This judgment highlights the importance of correctly reversing CENVAT credit and the liability to pay interest on wrongly availed credit, based on legal provisions and precedents cited during the proceedings.
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