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2015 (5) TMI 375 - BOMBAY HIGH COURT

2015 (5) TMI 375 - BOMBAY HIGH COURT - 2015 (321) E.L.T. 611 (Bom.) - Demand of interest on wrong availment of CENVAT Credit - Whether in the facts and circumstances of the case and in law the Hon'ble CESTAT, is correct in allowing the appeal filed by the assessee that the assessee is not liable to pay interest on the Cenvat Credit taken wrongly but not utilized which is beyond the purview of the provisions of the C. Excise Law and the Rules made thereunder - Held that:- A bare reading of the Ru .....

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redit has been utilized wrongly for according to the High Court interest cannot be claimed simply for the reason that the CENVAT credit has been wrongly taken as such availment by itself does not create any liability of payment of excise duty.

A statutory provision is generally read down in order to save the said provision from being declared unconstitutional or illegal. Rule 14 specifically provides that where CENVAT credit has been taken or utilized wrongly or has been erroneously r .....

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ny of the three aforesaid circumstances such credit becomes recoverable along with interest - Tribunal was of the view that in view of the judgment of the Punjab and Haryana High Court the Appeal deserves to be allowed on the short ground and as such, has not gone into other aspects of the matter. We find that it will be appropriate if the matter is reconsidered by the learned Tribunal. - Matter remanded back - Decided in faovur of Revenue. - Central Excise Appeal (LODG) No. 15 of 2011 - Dated:- .....

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ay interest on the Cenvat Credit taken wrongly but not utilized which is beyond the purview of the provisions of the C. Excise Law and the Rules made thereunder?" 2. By consent heard finally. The Respondent - assessee was holding central excise registration. The assessee is engaged in the manufacture of excisable goods viz. the machinery for making paper pulp, paper board etc. falling under Chapter Heading No.8439. The assessee is also registered under Chapter V of the Finance Act of 1994 i .....

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008 vide debit entry Nos.43 and 44. It is the case of the Revenue that the assessee had suo moto availed the credit which was not permissible in accordance with law. Since the assessee failed to pay interest of ₹ 66,945/-, a show cause notice was issued to the assessee calling upon them to show cause as to why : "(i) the inadmissible suo-moto credit amounting to ₹ 5,35,500/- availed by them should not be disallowed and recovered from them under the provisions of Rule 14 of the C .....

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e was adjudicated by the Additional Commissioner, Central Excise, Pune by order dated 21st August, 2009 by which the Additional Commissioner confirmed the demand and held that the suo motu credit of ₹ 5,35,500/- was wrongly availed by the assessee. By the said order the amount which was debited by the assessee on 31st December, 2008 was appropriated towards the demand made. The Additional Commissioner also directed the recovery of interest amounting to ₹ 66,945/-. Being aggrieved the .....

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H) held that merely by the reason that the Cenvat credit has been wrongly taken by itself does not create any liability of payment of excise duty and as such, set aside the impugned orders and allowed the appeals. Being aggrieved thereby, the present Appeal. 5. Ms. Suchitra Kamble, learned counsel appearing on behalf of the Revenue submits that the judgment of the Punjab and Haryana High Court on which the learned CESTAT has relied has been reversed by the Apex Court in the case of Union of Ind .....

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ng liability on an assessee. The learned senior counsel submits that if a strict and liberal interpretation is to be applied then, the words "and the provisions of Sections 11A and 11AB of the Excise Act or Sections 73 and 75 of the Finance Act, shall apply mutatis mutandis for effecting such recoveries" cannot be ignored. The learned senior counsel submits that as such, while a recovery under Rule 14 is to be made, it can only be made by reading the provisions of Section 11 and Sectio .....

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unsel submits that since in the present case there is no such determination and direction to make the payment, there would be no compliance with Section 11A. The learned senior counsel further submits that even the perusal of Section 11AB would reveal that the provision of making payment of interest would arise only in the event there is determination under sub section (2) of Section 11A to make the payment. The learned senior counsel submits that in the present case, there is no question of pay .....

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r the assessee has illegally taken the credit or not. The learned senior counsel submits that though the credit has been legally taken and also utilized in a legal manner, the authorities on an erroneous reading of the rules have held that the credit was erroneously utilized. The learned senior counsel also relies on a Division Bench judgment of the Karnataka High Court in the case of Commissioner of C. Ex. & S.T., LTU, Bangalore v. Bill Forge Pvt. Ltd. reported in 2012 (279) ELT 209 (Kar) a .....

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Apex Court. The Rule which falls for consideration before us is the same rule which has been considered and interpreted by the Apex Court. In that view of the matter, we do not find it necessary to go into that issue. 10. The only issue that falls for consideration before us is as to whether the learned CESTAT was justified in setting aside the order passed by the original authority directing the assessee to pay the interest or not. 11. In the case before the Punjab and Haryana High Court which .....

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lows : "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 same along with interest shall be recovered from the manufacturer or the provider of the output service and the provisions of Sections 11A and 11AB of the Excise Act or Sections 73 and 75 of the Finance Act, shall apply mutatis mutandis for effecting such recoveries." 16. A bare reading of the said Rule woul .....

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and utilized wrongly, interest should be payable from the date the CENVAT credit has been utilized wrongly for according to the High Court interest cannot be claimed simply for the reason that the CENVAT credit has been wrongly taken as such availment by itself does not create any liability of payment of excise duty. Therefore, High Court on a conjoint reading of Section 11AB of the Act and Rules 3 & 4 of the Credit Rules proceeded to hold that interest cannot be claimed from the date of wr .....

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r utilized wrongly or has been erroneously refunded, the same along with interest would be recovered from the manufacturer or the provider of the output service. The issue is as to whether the aforesaid word "OR" appearing in Rule 14, twice, could be read as 'AND' by way of reading it down as has been done by the High Court. If the aforesaid provision is read as a whole we find no reason to read the word "OR" in between the expressions 'taken' or 'utilized .....

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ot; to be substituted by "and". The Lordships therefore found that applying the principle of strict and liberal interpretation the same was not permissible. 13. In view of the clear pronouncement of law by the Apex Court, we find that the view taken by the learned Tribunal may be though correctly taken at that point of time, on the basis of the judgment of the Punjab & Haryana High Court, would no longer be correct in view of the subsequent judgment of the Apex Court in the case of .....

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ition as obtained in the matter and therefore, it will be beyond our jurisdiction to decide a matter which is basically based on factual situation. We, therefore, find that it will be appropriate if the said issue is decided by the learned Tribunal. 15. In so far as the judgment of the Karnataka High Court is concerned, it appears that the said judgment is delivered by the Karnataka High Court on the facts of the said case. It would be relevant from the facts as stated in the said judgment that .....

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