2017 (10) TMI 25

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....Credit Rules, 2004, the Department disputed taking of such cenvat credit by the appellant. Accordingly, after initiation of show cause proceedings, the ld. Adjudicating Authority vide the impugned order dated 17.10.2016 has confirmed the interest demand under Rule 14 ibid and also imposed penalty under sub rule (1) of Rule 15 ibid read with Section 76 of the Finance Act, 1994. 2. The ld. Advocate appearing for the appellant submits that the wrongly availed cenvat credit was never utilized by the appellant and said credit was all along available in the cenvat register till its reversal. Thus, she submits that since the wrongly availed Cenvat credit has never been utilized for payment of Service tax on the taxable services, entering of cre....

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....ed by it. Thus, in such an eventuality, the taking of irregular credit in the cenvat account will be considered as a mere book entry and in absence of proof of its utilization, the interest liability cannot be fastened against the appellant. In this context, the Hon'ble Karnataka High Court in the case of Bill Forge Pvt. Ltd. (supra) held that credit of excise duty in the register maintained for this purpose is only a book entry and before utilization of such credit, if the entry is reversed, the same amounts to not taking of cenvat credit. Accordingly, the Hon'ble High Court ruled that in absence of non-utilization of cenvat credit, interest demand cannot be confirmed. The relevant paragraphs in the said judgment are extracted herein below....

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....factory and the stage for payment of excise duty is reached. Actually, the credit is taken, at the time of the removal of the excisable product. It is in the nature of a set off or an adjustment. The assessee uses the credit to make payment of excise duty on excisable product. Instead of paying excise duty, the cenvat credit is utilized, thereby it is adjusted or set off against the duty payable and a debit entry is made in the register. Therefore, this is a procedure whereby the manufacturers can utilise the credit to make payment of duty to discharge his liability. Before utilization of such credit, the entry has been reversed, it amounts to not taking credit. Reversal of cenvat credit amounts to non-taking of credit on the inputs. 21.....