TaxTMI 
TaxTMI 
TaxTMI 
2019 (2) TMI 931
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.... were cleared from the factory, "as such", without utilizing the same for the manufacture of goods. It was viewed that such goods cleared as such, were not inputs as defined under Rule 2 (k)(1) of Cenvat Credit Rules, 2004. It was further noted that at the time of clearance of inputs, as such, the invoice under Rule 11 of the Central Excise Rules, 2002, was issued and the assessee had reversed proportionate cenvat credit by debiting the Cenvat Credit Account. By issuance of show-cause notice dated 12.05.2009, the Department proposed to disallow the cenvat credit to the tune of Rs. 1,22,23,924/- on goods cleared as such. It was also proposed for recovery of interest at appropriate rate under Rule 14 of Cenvat Credit Rules, 2004 read with Section 11AB of the Act. Further, penalty under Rule 15 of the Cenvat Credit Rules, 2004, read with Section 11AC was also proposed. Show-cause notice was decided by the adjudicating authority by issue of impugned order. The Adjudicating Authority held the cenvat credit availed on inputs to be irregular and since the same already stands reversed, ordered for payment of interest along with penalty of Rs. 5,00,000/- under Rule 15(1) of the Cenvat Credi....
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....re of final product. He pointed out that the final product, Synthetic Detergent Powder, has never been manufactured by the assessee and as such, the inputs procured for the same, are to be considered as trading inputs. Such cenvat credit merits to be reversed. Further, he submitted that the interest is required to be paid, particularly, in view of the fact that cenvat credit account has been maintained by the assessee in a consolidated manner. He also submitted that the Adjudicating Authority was required to impose penalty under Rule 15(2) in addition to the penalty already imposed. 7. Heard both sides and perused the records. 8. The dispute has arisen in the present case as a result of observation of the Audit Team during the course of scrutiny of the assessee's records. The assessee has procured various inputs required for manufacture of final products. It was noticed that one of the final products i.e. Synthetic Detergent Powder, was not manufactured by the assessee. Revenue has taken the view that the inputs procured for manufacture of Synthetic Detergent Powder, cannot be considered as inputs covered by the definition in Rule 2(k)(1) of the Cenvat Credit Rules. In this conne....
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....r, I further observe that the said assessee maintained Cenvat Credit account in a consolidated manner i.e. the credit of duty paid on inputs for his own manufactured items as well as traded items. From the report of the jurisdictional Assistant Commissioner, it is also observed that the said assessee did not utilize the credit taken on the disputed items in payment of duty for the removal of their own manufactured goods. Therefore, allegation on the point that they utilized credit taken on impugned inputs in payment of duty on removal of their manufactured products, does not stand." In view of the above observations of the Adjudicating Authority, we are led to the conclusion that the assessee did not utilize the credit availed on the un-used inputs before reversal of the same. Under such circumstances, no interest liability will arise on the assessee. This view finds support in the decision of the Hon'ble Madras High Court in the case of Sri Kumaran Alloys (P) Ltd. (supra) wherein it is held as under : "15. One more aspect, which prompts us to say so, is in the light of the decision of this Court in the case of Commissioner of Central Excise, Chennai-IV v.Sundaram Fasteners Limi....
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....o read the word "OR" in between the expressions 'taken' or 'utilized wrongly' or has been erroneously refunded as the word "AND". It was further held that on the happening of any of the three circumstances viz., credit taken or credit utilized wrongly or credit has been erroneously refunded, then such credit becomes recoverable. along with interest. Further the Hon'ble Supreme Court held that so far as Section llAB of the Act is concerned, the same becomes relevant and applicable for the purpose of making recovery of the amount due and -payable. Therefore, it observed that the High Court in the said case erroneously held that the interest can be claimed from the date of wrongful availment of Cenvat credit and it should only be payable from the date when Cenvat credit is wrongly utilized. 9. The Learned Counsel appearing for the assessee sought to distinguish the decision of the Hon'ble Supreme Court in the case of IND-SWIFT LABORATORIES LTD. by stating that, that was a case where the Cenvat credit was taken and utilized and not a case where Cenvat credit has been reversed as that of the case of the assessee herein. It is his further submission that revers....
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....ed Counsel for the assessee contended that, when credit has been reversed before utilization, the same did not amount to taking credit. 14. We reject the arguments of the assessee. In the said decisions, it has been no doubt held that interest is compensatory and the question arises only where principal is due. If one gets into the background of the scheme of Modvat Credit, his contention that the assessee has taken credit, does not merit consideration, particularly so, in the background of Rule 14. As it stands today, one has to go only by the provisions contained in Rule 14 and nothing beyond. 15. Further, the decision rendered in Bombay Dyeing case reported in 2007 (215) E.L.T.3 (S.C.) is also distinguishable one, considering again the issue raised therein with reference to notification No. 14/2002-C.E., granting exemption, a situation similar to the cases in Hello Minerals as well as Chandrapur Magnet." 16. The above referred decision in Sundaram Fasteners Limited (supra) was rendered on 30-1-2014 and it appears that the same was not placed before the Division Bench, while the decision was rendered in the case of Strategic Engineering (P) Ltd. (supra), which was rendere....