TMI Blog2011 (4) TMI 969X X X X Extracts X X X X X X X X Extracts X X X X ..... overnment would have sustained loss to that extent. Then the liability to pay interest from the date the amount became due arises under Section 11 AB in order to compensate the Government which was deprived of the duty on the date it became due. Without the liability to pay duty, the liability to pay interest would not arise. The liability to pay interest would arise only when the duty is not paid on the due date. If duty is not payable, the liability to pay interest would not arise, Order of Tribunal upheld, substantial question of law framed is answered against the Revenue and in favour of the assessee - CEA No.96 of 2010 - - - Dated:- 5-4-2011 - Shri N. Kumar and Shri Ravi Malimath, JJ Represented By: Shri N.R. Bhaskar, Advocate for Appellant Shri M.A. Narayana, Advocate for Respondent JUDGEMENT Per: N Kumar: This appeal is by the revenue challenging the order passed by the Tribunal, setting aside the order passed by the lower authorities holding that the assessee is liable to pay interest and penalty for taking the Cenvat credit wrongly. 2. The facts are not in dispute. 3. The assessee is engaged in the manufacture of accessories of motor vehicles ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had taken irregular credit with an intention to avoid payment of duty. Therefore they held that imposition of penalty is unsustainable and accordingly set aside the said portion of the order. In so far as payment of interest is concerned, they relied on the judgment of the Punjab and Haryana High Court in the case of CCE Delhi Vs. Maruthi Udyog Ltd., [2007 (214) ELT A 50) and held that as the assessee had only made an entry in the records and actually not taken or utilized such credit, the question of payment of any interest would not arise. Therefore, the levy of interest was also set aside. Aggrieved by the said order, the Revenue is in appeal. 5. The learned Counsel appearing for the Revenue, assailing the impugned order contended that in view of the judgement of the Apex Court in the case of UNION OF INDIA Vs. IND-SWIFT LABORATORIES LTD., interest is payable once the credit is taken as the assessee would be at liberty to utilize the same immediately thereafter subject to the Credit Rules and therefore the Tribunal committed a serious error in setting aside the levy of interest from the date of taking credit. He also contended that it is a clear case of taking the credit wron ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id or has been short-levied or short paid or erroneously refunded the person who is liable to pay the duty as determined under sub-section (2), or has paid the duty under sub-section (2B), of section 11A shall, in addition to the duty, be liable to pay interest at such rate not below [ten per cent] and not exceeding thirty six per cent per annum, as is for the time being fixed by the Central Government, by notification in the Official Gazette, from the first date of the month succeeding the month in which the duty ought to have been paid under this Act, or from the date of such erroneous refund, as the case may be, but for the provisions contained in sub-section 02, or sub-section 11A till the date of payment of such duty: PROVIDED that in such cases where the duty becomes payable consequent to issue of an order, instruction or direction by the Board under Section 37B, and such amount of duty payable is voluntarily paid in full, without reserving any right to appeal against such payment at any subsequent stage, within forty-five days from the date of issue of such order, instruction or direction, as the case may be, no interest shall be payable and in other cases the interest s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... character. 11. Therefore it is clear that the liability to pay interest under Section 11AB arises when the assessee is liable to pay duty on the date which is prescribed under sub-section (1), fails to pay the same. Then the liability to pay interest arises from the date the duty is payable till the date it is paid. By such late payment or delayed payment, the Revenue is deprived of the duty. The said amount would be in possession of the assessee who would have the benefit of the said amount. It is to compensate the loss sustained by the Revenue, the interest is imposed, i.e. interest is payable for the period during which the Revenue is deprived of the duty, which it was legitimately entitled to and as the assessee had the benefit of the duty by not paying the duty payable on the due date. In other words it is compensatory in character, and is imposed on the assessee who has withheld payment of any tax as and when it is due and payable. 12. It is in this context we have to see the judgments of the Apex Court dealing with the Modvat Scheme, where an assessee is liable to pay the duty when he wants to have the benefit of the said scheme. The Apex Court in the case of COLLECTOR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se authorities except where it has been illegally or irregularly taken, in which event it stands cancelled or, if utilized, has to be paid for. We are here really concerned with credit that has been validly taken, and its benefit is available to the manufacturer without any limitation in time or otherwise unless the manufacturer itself chooses not to use the raw material in its excisable product. The credit is, therefore indefeasible. It should also be noted that there is no co-relation of the raw material and the final product; that is to say, it is not as if credit can be taken only on a final product that is manufactured out of the particular raw material to which the credit is related. The credit may be taken against the excise duty on a final product manufactured on the very day that it becomes available. They also took note of the guidance note on accounting treatment for MODVAT which is set out in the aforesaid Judgment at para-22 as under:- 22. Learned Counsel for the Respondents made reference to the Guidance Note on accounting treatment for Modvat as on 16 th March, 1995 issued by the Institute of Chartered Accountants of India. The Guidance Note deals (in paragra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble to be made, credit entry for the duties paid on the inputs utilised in manufacture of the final exempted product will stand deleted in the accounts of the assessee. In such a situation, it cannot be said that the assessee has taken credit for the duty paid on the inputs utilised in the manufacture of the final exempted product under Rule 57A. In other words, the claim for exemption of duty on the disputed goods cannot be denied on the plea that the assessee has taken credit of the duty paid on the inputs used in manufacture of these goods. 14. The Apex Court in the case of COMMISSIONER OF CENTRAL EXCISE VS. BOMBAY DYEING MFG. CO. LTD. reported in 2007 (215) ELT 3 (SC) held as under: 8. Under the notification, mode of payment has not been prescribed. Further, exemption is given to the final product, namely, grey fabric under the Central Excise Act, 1944, levy is no manufacture but payment is at the time of clearance. Under the Act, payment of duty on yarn had to be at the spindle stage. However, when we come to the Exemption Notification No.14/2002-C.E., the requirement was that exemption on grey fabrics was admissible subject to the assessee paying duty on yarn before c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the manufacture of these goods. Xxxxxxx Xxxxxxx This issue had come up for consideration before the Allahabad High Court in the case of HELLO MINERALS WATER (P) LTD., VS. UNION OF INDIA, reported in 2004 (174) 422 (All), wherein it is held that the reversal of Modvat credit amounts to non-taking of credit on the inputs. Hence, the benefit has to be given of the notification granting exemption rate of duty on the final products since the reversal of credit on the input was done at the Tribunal's stage. While arriving at this conclusion the Allahabad High Court has referred to various Judgments under which such reversal was made subsequently and still the benefit was given to the assessee. 16. The Apex Court in the case of UNION OF INDIA vs. M/s. IND-SWIFT LABORATORIES LTD., (SC) (CX) in Civil Appeal No.1976/2011 interpreting Rule 14 of CENVAT Credit Rules, 2004 held as under:- "2. A bare reading of the said Rule would indicate that the manufacturer or the provider of the output service becomes liable to pay interest alongwith the duty where CENVAT credit has been taken or utilized wrongly or has been erroneously refunded and that in the case of the aforesaid nature t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s wrongly utilized. Besides, the rule of reading down is in itself a rule of harmonious construction in a different name. It is generally utilized to straighten the crudities or ignoring out the creases to make a statute workable. This Court has repeatedly laid down that in the garb of reading down a provision it is not open to read words and expressions not found in the provision/ statute and thus venture into a kind of judicial legislation. It is also held by this Court that the Rule of reading down is to be used for the limited purpose of making a particular provision workable and to bring it in harmony with other provisions of the statute. XX XX XX XX XX XX 2. Therefore, the attempt of the High Court to read down the provision by way substituting the word OR by an AND so as to give relief to the assessee is found to be erroneous. In that regard the submission of the counsel for the appellant is well founded that once the said credit is taken the beneficiary is at liberty to utilize the same, immediately thereafter, subject to the Credit Rules. 17. As is clear from the aforesaid judgments, the Apex Court in the case of UNION OF INDIA Vs. M/s. IND-SWIFT LABORATORIES ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat a sum of Rs.5,71,47,148-00 is the duty payable and simple interest at 10% on Cenvat credit wrongly availed from the date the duty became payable as per Section 11 AB of the Act till the date of payment. The Revenue calculated the said interest up to the date of the appropriation of the deposited amount and not up to the date of payment. Therefore it was contended that interest has to be calculated from the date of actual utilization and not from the date of availment. Therefore, an application was filed for clarification by the assessee. The said application was rejected upholding the earlier order, i.e., interest is payable from the date of duty becoming payable as per Section 11-AB. Therefore the Apex Court interfered with the judgment of the Punjab and Haryana High Court and rightly rejected by the Settlement Commission as outside the scope and they found fault with the interpretation placed on Rule 14. 19. Rule 14 of the CENVAT Credit Rules, 2004 reads as under: Rule 14. Recovery of CENVAT credit wrongly taken or erroneously refunded. Where the CENVAT credit has been taken or utilized wrongly or has been erroneously refunded, the some along with interest shall be reco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has not been levied or paid or has been short levied or short paid or erroneously refunded, the person liable to pay duty, shall in addition to the duty is payable from the date of book entry, showing entitlement of Cenvat credit. Interest cannot be claimed from the date of wrong availment of CENVAT credit and that the interest would be payable from the date CENVAT credit is taken or utilized wrongly. 22. In the instant case the facts are not in dispute. The assessee had availed wrongly the Cenvat credit on capital goods. Before the credit was taken or utilized, the mistake was brought to its notice. The assessee accepted the mistake and immediately reversed the entry. Thus the assessee did not take the benefit of the wrong entry in the account books. As he had taken credit in a sum of Rs.11,691-00, a sum of Rs.154-00 was the interest payable from the date the duty was payable, which they promptly paid. The claim of the Revenue was, though the assessee has not taken or utilized this Cenvat credit, because they admitted the mistake, the assessee is liable to pay interest from the date the entry was made in the register showing the availment of credit. According to the Revenue, onc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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