1% interest penalty when cenvat credit reversed without utilising

[P Ovhal]

Dear Expert,

We are manufacturer of exciseble goods. We have taken CENVAT credit on our Input services consumed in manufacturing process. But still we have not utilized that CENVAT credit since 2006. One of part of our Input service is not covered as an input service. We have reversed CENVAT credit as per asked by the Auditor. But they also asked to 1% penalty on reversed CENVAT credit. Please suggest me rule/Notification on which basis Auditor has asked to us for pay 1% penalty in above condition.

regards,

Provhal

AI Summary

Manufacturer Challenges 1% Penalty Demand; Cites Time-Barred Claim Under Finance and Central Excise Acts A manufacturer of excisable goods reversed CENVAT credit on input services after an auditor's request, who also demanded a 1% penalty. Experts in a forum advised that the matter may be time-barred under Section 73 of the Finance Act, 1994, and Section 11A of the Central Excise Act, 1944. They noted that CENVAT credit interest applies only if it was both taken and utilized, as per Rule 14 of the CENVAT Credit Rules, 2004. The 1% penalty is not applicable unless specified under Rule 8(3A) of the Central Excise Rules, 2002, for unpaid duties.