PENALTY AND INTEREST ON REVERSAL OF CENVAT CREDIT WRONGLY AVAILED.

[VINOD KUMAR]

GOOD EVENING RESPECTED EXPERTS. SIR, Whether a assessee who has reversed wrongly availed cenvat credit on own is liable to penalty and interest in the following situations:-

1. Date of taking credit is January 10, 2012 and date of reversal is December 16, 2014. But the assesse has not utilized the wrongly availed cenvat.

2. Date of availment is June 10,2012 and date of reversal is December 16 2014. The assesse has not utilized the wrongly availed cenvat. What will happen had the assesse utilized the wrongly availed cenvat in both situations. Pl. Reply. Thanks and regards.

[Mahir S]

1) Yes

2) No

[Lekh Sood]

Hello Dipak,

Situation 1:

As the law stood at the relevant time, interest and penalty is leviable even if the credit is not utilized. However, if the credit is reversed later , before being pointed out by excise authorities then there is no question of interest and penalty. This is so because credit reversed is held to be credit not availed. However, The dispute for the intervening period is not ruled out.

If the credit was utilized then of course, the interest and penalty are leviable.

Situation 2

Since now the rule is the that the interest and penalty are leviable only if the cenvat credit is wrongly taken and utilized, the interest and penalty cannot be levied as the credit was not utilized.

If the credit was utilized then the interest and penalty are leviable.If the credit is later reversed then the interest for the period from utilising the credit to reversing the credit will be levied.

AI Summary

Interest and penalty depend on whether wrongly availed cenvat credit was utilised or timely reversed under the existing rule. Levy of interest and penalty for wrongly availed Cenvat credit depends on utilisation and timing of reversal: earlier practice permitted levy even without utilisation, though voluntary reversal before detection could negate liability; under the later rule interest and penalty apply only if the wrongly availed credit was utilised, and interest is computed from utilisation to reversal.