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M/s Ind-Swift Laboratories Ltd. Versus Commissioner of Central Excise, Chandigarh-II

2015 (12) TMI 1050 - CESTAT NEW DELHI

Demand of interest on the credit wrongly taken and reversed before utilizing the same - whether interest is chargeable on the cenvat credit wrongly taken, though the same is reversed before utilization of the credit - Held that:- it is seen that there are judgements of various High Courts which have taken different views referring to the Hon'ble Apex Court judgement in the case of Indo Swift Laboratories case [2011 (2) TMI 6 - Supreme Court]. I find that the Hon'ble High Court of Madras in Strat .....

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ase. In this background of judicial dispositions on the issue, I am inclined to follow the judgement laid by Hon'ble High Court of Karnataka in the case of M/s.Bill Forge (P) Ltd. which has been endorsed by the Hon'ble High Court of Madras in Strategic Engineering (P) Ltd. case. - interest is not chargeable on the credit wrongly taken which was reversed before utilization. - Decided in favour of assessee. - Appeal Nos. E/53056-53057/2014-Ex-SM - Dated:- 24-11-2015 - Sulekha Beevi CS, Member (J) .....

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uxiliary service (commission paid outside India) for which appellants hold Service Tax Registration. The appellants were also availing cenvat credit facility of duty paid on inputs, capital goods, and input services. In the course of audit it was observed that appellant had wrongly taken credit on inputs amounting to ₹ 4,47,827/-, but had subsequently reversed the same. The appellant was required to pay the interest of ₹ 22,843/-from the date of wrongly taking credit to the reversal .....

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13.11.2009 proposing the demand of interest of ₹ 22,843/- and imposition of penalty. The adjudication culminated in the Order-in-Original which confirmed the demand of interest and imposed equal amount of penalty. In appeal, the Commissioner (Appeals) vide impugned order upheld the same. Being aggrieved the appellant is before the Tribunal. 3. The learned counsel for appellant submitted that the credit taken was reversed very soon on coming to know of the mistake. As the credit taken was r .....

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s per Rule 14 of the Cenvat Credit Rules, 2004, the appellants were liable to pay interest even if credit was reversed before utilization. He placed reliance on the judgements rendered by Hon'ble Apex Court in the appellants' own case and reported in 2011(265) ELT 3 (SC) . The other cases relied by the Revenue are CCE, Pune vs.G.L. & V India Pvt.Ltd.-2015 (321) ELT 611 (Bom.) and CCE, Chennai vs. Delphi TVS Diesel Systems Ltd.-2015 (322) ELT 279 (Mad.) 5. The period of dispute in the .....

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not liable to pay any interest. 6. At this juncture, it would be worthwhile to notice Rule 14 of Cenvat Credit Rules, 2004, as it stood during the relevant period: "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 Exc .....

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er side. The Hon'ble Karnataka High Court in the case of M/s.Bill Forge (P) Ltd. has made a detailed analysis and observed that the Hon'ble Apex Court in Indo Swift Laboratories' case was essentially concerned with the interpretation placed by the Punjab & Haryana High Court with regard to the words 'or' appearing twice in Rule 14 of the Cenvat Credit Rules, 2004. The Hon'ble High Court in the case of Bill Forge (P) Ltd. observed as under:- 20.............. "The .....

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unts to non-taking of credit on the inputs". 21. Interest is compensatory in character, and is imposed on an assessee, who has withheld payment of any tax, as and when it is due and payable. The levy of interest is on the actual amount which is withheld and the extent of delay in paying tax on the due date. If there is no liability to pay tax, there is no liability to pay interest. Section 11AB of the Act is attracted only on delayed payment of duty i.e., where only duty of excise has not b .....

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ce the entry was reversed, it is as if that the Cenvat credit was not available. Therefore, the said judgment of the Apex Court has no application to the facts of this case. It is only when the assessee had taken the credit, in other words by taking such credit, if he had not paid the duty which is legally due to the Government, the Government would have sustained loss to that extent. Then the liability to pay interest from the date the amount became due arises under Section 11AB, in order to co .....

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0.2.2014. In this judgement, the Hon'ble Court has not only considered the decision in Indo Swift Laboratories' case and the view taken in M/s.Bill Forge (P) Ltd. case but has also analyzed the subsequent amendment brought forth in Rule 14 of the Cenvat Credit Rules, 2004. The Hon'ble High Court has observed therein as under: 11. It is an admitted fact that Rule 14 of the Cenvat Credit Rules as been subsequently amended, wherein it has been clearly stated as "taken and utilised& .....

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advanced on the side of the respondent is really having merit and the substantial questions of law settled in the present Civil Miscellaneous Appeal are not having substance and altogether the present Civil Miscellaneous Appeal deserves to be dismissed. 9. Prior to the above amendment, the word 'or' used twice in Rule 14 created a confusion whether taking the credit itself would attract interest and penalty. The judgement rendered in M/s.Bill Forge case has discussed this aspect and held .....

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relies upon the judgements of the Hon'ble Madras High Court in Delphi TVS Diesel Systems Ltd. (supra) decided on 31.1.2014, wherein the Hon'ble High Court held that interest is chargeable even if the credit is reversed before utilization. The Hon'ble Court therein relied upon its own decision rendered in CCE vs. Sundaram Fasteners Limited case decided one day before the decision made in Delphi TVS Diesel Systems Ltd. case. The Hon'ble High Court was more inclinded to follow the d .....

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