By Puloma Dalal, Jayesh Gogri, Chartered Accountants
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No interest is payable on reversal of CENVAT credit availed but not utilised. Judgment of Supreme Court in Ind-Swift Laboratories distinguished.
Facts:
The Appellant, a manufacturer, had two units in Bangalore. The credit on input services received by both the units was shown in CENVAT account maintained in UNIT-I. On account of an audit objection, the Appellant reversed the said availment of credit. An SCN was issued demanding interest and proposing penalty on the said reversal. The Original Authority dropped the demands, the order was reviewed and the Commissioner (Appeals) in addition to interest and penalty also disallowed the CENVAT and appropriated the same on which equal penalty was also levied.
The Appellant contended that no issue other than one pertaining to interest on reversal could be examined by the lower appellate authority and further relying on the decision of the Hon. Karnataka High Court in CCE, Bang. vs. Gokaldas Images (P) Ltd. 2012 (28) 214 (Kar) stated that no interest ought to have been levied since no amount was utilised for payment of duty.
The revenue relying on the decision of the Hon. Supreme Court in Ind-Swift Laboratories contended that the term taken ‘or’ utilised cannot be construed to mean ‘and’, and thus interest was liable to be paid.
Held:
The Tribunal while relying on the decision of Gokaldas Images (P) Ltd. (supra) allowed the appeal and observed that duty to pay interest for delayed payment would not arise unless the credit of duty entered into the account books is duly taken to discharge the duty payable. The said credit was not actually utilised for payment of duty as the Appellant only availed the credit and not utilised.
