By Puloma Dalal, Jayesh Gogri, Chartered Accountants
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CENVAT credit of excise duty payment taken and reversed before utilisation does not attract interest u/s.11AB of Central Excise read with Rule 14 of CENVAT Credit Rules.
Facts:
The respondent paid excess excise duty and took CENVAT credit of such excess excise duty suo moto. However, the CENVAT credit was reversed before its utilisation. The Department contended that once it is established that CENVAT credit is wrongly availed, liability of interest is automatic and it has no relation with non-utilisation of such CENVAT Credit.
Held:
The amount wrongly credited to the CENVAT Credit Account which is not utilised, does not cause any loss to revenue nor does it benefit the assessee. It does not amount to improper payment of duty or non-payment of duty or late payment of duty. In the present case, the assessee instead of claiming refund availed CENVAT Credit. Moreover, the same was reversed subsequently before its utilisation. Therefore, following the Apex Court’s decision in case of Bombay Dyeing & Manufacturing Co. Ltd. (2007) (215 ELT 3), the same amounts to “not taking credit”, and therefore Rule 14 of the CENVAT Credit Rules, 2004 (dealing with recovery of CENVAT credit wrongly taken or erroneously refunded) and section 11AB of the Central Excise Act, 1944 (providing for interest on delayed payment of duty) would not apply.
Comments: In view of the Supreme Court ruling in case of Ind Swift Labs vs. Union of India (reported above), the above judgment may not hold good. As per Hon’ble Supreme Court and subsequent Circular of the Board dated 14/03/2011, interest is payable even on CENVAT credit availed wrongly.
