2011 (8) TMI 988

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....e manufacture of their final products. An audit party from the department visited Unit-I and detected the fact that the entire credit on the input services received by both the units had been taken in CENVAT account maintained by Unit-I. The auditors recorded their objection and also noted in their report that Unit-I was liable to reverse the credit in question and also pay interest thereon. This audit took place in August 2008 and, soon thereafter, the objectionable credit was reversed on 18-9-2008. One and a half years later, the department issued a show-cause notice dated 11-2-2010 for recovery of interest on the credit in question under Section 11AB of the Central Excise Act and also for imposition of penalty Under Rule 15 of the CENVAT....

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.... Credit under the provisions of rule 15(4) of Cenvat Credit Rules, 2004 read with section 11AC of Central Excise Act, 1944. However, the penalty so imposed is reduced to the extent of 25% of the irregularly availed Cenvat credit under proviso to section 11AC of Central Excise Act, 1944 provided the interest along with the reduced penalty amount is paid within thirty days from the date of receipt of this order." The present appeal of the assessee is directed against the above order of the appellate Commissioner. 2.  Heard both sides. 3.  The learned Counsel for the appellant points out that no issue other than the one pertaining to interest on the amount of CENVAT credit reversed by the appellant was liable to be examined ....

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.... in their CENVAT account and such interest should be paid for the period from the date of taking of the credit to the date of its reversal. In the case of Gokaldas Images (P) Ltd. (supra), the Hon'ble High Court held that the liability to pay interest for the delayed payment would not arise unless the credit of duty entered in the account books was duly taken to discharge the duty payable. This view, with great respect, can only be seen as contrary to the ruling of the Hon'ble Supreme Court. Another view taken in the case of Gokaldas Images (P) Ltd. is that, if the CENVAT credit in question is reversed, it amounts to not taking the credit at all and, therefore, the question of payment of interest would not arise. Obviously, in that case, th....