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2016 (8) TMI 6 - CESTAT HYDERABAD

2016 (8) TMI 6 - CESTAT HYDERABAD - 2016 (344) E.L.T. 923 (Tri. - Hyd.) - Claim of interest on reversal of Canvet Credit - credit availed on the Volvo Tippers procured from Volvo - Held that:- he mere taking of non-entitled credit by way of a book entry will in no way cause financial adversity to the exchequer, unless such ineligible credit comes to be utilized. We therefore find that by stretch of imagination can the act of taking ineligible credit, however reversing the entire wrongly taken cr .....

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be adversely affected, since otherwise the assessee would have to pay from account current or cash instead of adjusting from CENVAT account. By implication, in such a scenario, when there is no adverse deprivation to the exchequer, there cannot be a claim of interest that can be latched on to the assessee. - Levy of penalty - Held that:- The proposal in the show cause notice for imposition of penalty should have been accepted and confirmed in toto or not at all. The adjudicating authority .....

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ee. - E/243/2008 & E/519/2008 - Final Order No. A/30569-30570/2016 - Dated:- 29-6-2016 - Ms. Sulekha Beevi, C.S. Member (Judicial) and Sh. Madhu Mohan Damodhar, Member (Technical) Sh. Karan Talwar, Authorised Representative for the assessee. Sh. V.V. Prasad Rao, Assistant Commissioner (AR) for the Revenue. ORDER The above appeals emanate from the same order of lower authority. One appeal is filed by Assessee whereas, the other is filed by Revenue. The parties are therefore referred to as Assesse .....

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e purpose of payment of Service Tax under the category of 'Site Formation and Clearance, Excavation and Earth Moving and Demolition' Services w.e.f. 16.06.2005. For the purpose of undertaking the transportation activities the Assessee procured Volvo Tippers falling under Central Excise Tariff head 8704.23.90 after payment of applicable Central Excise duty and took credit of the excise duty paid on tippers. 3. The Appellant was issued with a Show Cause Notice No. C.No. V (ST)/15/24/2008-A .....

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ty of ₹ 60,00,000/- under Rule 15 of the CENVAT Credit Rules, 2004 and penalty of ₹ 1,000/- under Section 77 of the Finance Act, 1994. Hence this appeal No. 243/2008 by the Assessee. 4. The Department also has filed an appeal against that portion of the impugned Order-in-Original, aggrieved by the decision of the Commissioner of Service Tax of reducing the penalty to ₹ 60,00,000/- under Rule 15 of the CENVAT Credit Rules, 2004. The appeal filed by department by Department is Ap .....

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of ₹ 6,60,61,607/- in April, 2008 from the opening balance of ₹ 8,16,19,079/-. In support of his plea he relied on the following judgments: i. Chandrapur Magnet Wires (P) Ltd., Vs. CCE [1996 (81) ELT 3 (SC)] ii. CCE Vs. Ashima Dyecot Ltd., [2008 (232) ELT 580 (Guj)] iii. CCE Vs. Bombay Dyeing & Mfg Co. Ltd., [2007 (215) ELT 3 (SC)] iv. CCE vs. Bill Forge Pvt. Ltd., [2012 (279) ELT (Kar)] v. CCE Vs Gokaldas Images (P) Ltd., [2012 (278) ELT (Kar)] vi. CCE Vs. Pearl Insulation Ltd. .....

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the records of the case. 7. We find that the issue that comes up for decision is whether interest liability will accrue to an assessee in respect Of ineligible CENVAT credit availed by them, even if such credit has not been utilized and has been reversed by the assessee. We find that as per Wharton's Law Dictionary, 2016 edition "Interest is compensation for forbearance or detention of money, Abati Bezbaruah Vs. DY D.G., AIR [2003 SC 1817 (1819): (2003) 3 SCC 1481 (Motor Vehicles Act, 1 .....

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Ltd., [(2010) 10 SCC 640 (646)], para 18]" 8. Viewed in this context, the mere taking of non-entitled credit by way of a book entry will in no way cause financial adversity to the exchequer, unless such ineligible credit comes to be utilized. We therefore find that by stretch of imagination can the act of taking ineligible credit, however reversing the entire wrongly taken credit without utilization, be considered as creating a right for the government for forbearance or detention of money, .....

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ing from CENVAT account. By implication, in such a scenario, when there is no adverse deprivation to the exchequer, there cannot be a claim of interest that can be latched on to the assessee. Our afore said views find sustenance in number of High Court and Supreme Court judgments. 9. The Hon'ble Apex Court in the case of CCE, Mumbai-I Vs Bombay Dyeing & Manufacturing Company Ltd., [2007 (215) ELT 3 (S.C.)] has interalia held that where credit taken but reversed before utilisation amounts .....

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C.E., the requirement was that exemption on grey fabrics was admissible subject to the assessee paying duty on yarn before claiming exemption and subject to the assessee not claiming CENVAT credit before claiming exemption. The question of exemption from payment of duty on grey fabrics arose on satisfaction of the said two conditions. In this case, payment of duty on yarn on deferred basis took place before clearance of grey fabrics on which exemption was claimed. Therefore, payment was made bef .....

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e following para from the judgment of this Court in Collector of Central Excise v. Dai Ichi Karkaria Ltd. reported in 1999 (112) E.L.T. 353. (S.C.) It is clear from these Rules, as we read them, that a manufacturer obtains credit for the excise duty paid on raw material to be used by him in the production of an excisable product immediately it makes the requisite declaration and obtains an acknowledgement thereof. It is entitled to use the credit at any time thereafter when making payment of exc .....

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n 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. 10. The Hon'ble High Court of Karnataka in the c .....

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the same along with interest shall be recovered from the manufacture 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. A reading of the aforesaid provisions makes it very clear that the said provision is attracted where the Cenvat Credit has been taken or utilized wrongly or has been erroneously refunded. In view of the aforesaid judgment of the .....

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utilised later for payment of excise duty on the excisable product. It is entitled to use the credit at any time thereafter when making payment of excise duty on the excisable product. It matures when the excisable product is received from the 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 .....

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e High Court of AP & T, which is the jurisdictional High Court for this Bench, in Commissioner Cus, CE & ST Vs Bharat Dynamics Ltd., [2016 (331) ELT 182 (A.P.)] after referring to the Indo Swift Laboratories case (supra) held the contention of the Revenue that when credit is wrongly taken the assessee is liable to pay interest to be unsustainable. The relevant portion of the judgment is reproduced below: 5. The Tribunal, in its order dated 22-10-2013, has recorded the following find .....

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ce some of the job workers did not return all the inputs within 180 days and they had to reverse the credit. To reverse the credit, they had to take credit. When there was no clarification received from the department till March, 2011, the assessee had no option but to clear two consignments in March, 2011 on payment of excise duty of ₹ 90,94,851/- by utilizing the Cenvat Credit. On getting the clarification from TRU in April, 2011, the appellant reversed the entire amount of Cenvat credit .....

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re asking them to pay interest was not correct. Moreover, any assessee, if he has any doubt, has a right to ask the department and such action is not contrary to the provisions of law. Further, in the circumstances of this case, it cannot be said that the credit had been taken by the appellant wrongly. When credit is not taken wrongly, the question of payment of interest does not arise in terms of provisions of Rule 14 of C.C.R. 2004. In these circumstances, we do not find that the appellant is .....

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of the notification and only in the absence of such clarification from the department, they took CENVAT credit during the intervening period i.e. from September, 2010 to March, 2011. It is also clearly observed that after getting clarification from TRU in April, 2011, the appellant reversed the entire amount of Cenvat credit. In that view of the matter, the specific contention put forth by the learned standing counsel that the respondent-assessee, without any eligibility, has taken the Cenvat c .....

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nalty. We find that in the SCN, penalty was proposed in terms of Rule 15 of CCR, 2004 read with Section 11 AC of the Central Excise Act, 1944. However, the adjudicating authority did not find much force for imposing penalty under section 11 AC or Rule 15 (2) ibid and limited penalty provisions to Rule 15 (1) alone of ₹ 60,00,000/- on the assessee. We are not able to accept the 'tweaking' of the said proposals in the show cause notice by the adjudicating authority only to suit his f .....

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