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Molex (India) Private Limited v. Commissioner of Central Excise - (Customs, Excise and Service Tax Appellate Tribunal) (03 Nov 2016)

Interest would be payable from date on which CENVAT credit is wrongly taken or utilized



Appellant is engaged in manufacture of electronic connector harness and other IT products availed CENVAT credit of duty paid on inputs and capital goods and service tax paid on input services. In month of March 2009, audit party visited Appellant's premises and observed that, Appellant availed CENVAT credit twice on same invoice and also that Appellant availed CENVAT credit on same bill of entry and said irregular credit worked out to Rs. 7,10,012/- and further 100% CENVAT credit has been availed in respect of capital goods in same financial year in which it was purchased. On being pointed out, Appellant voluntarily reversed such irregular credit. Thereafter, internal audit team issued an audit note wherein interest of Rs. 1,76,023/- in respect of reversal of CENVAT credit was demanded. Subsequently, Appellant received show-cause notice alleging demand of interest of Rs. 1,76,023/- in respect of irregular availment of CENVAT credit and also proposed penalty under Rule 15 CCR, 2004. Appellant refuted allegation in show-cause notice. Adjudicating authority upheld allegation in the show-cause notice and confirmed demand of interest and appropriated interest paid under protest. Aggrieved by said order, Appellant filed appeal before Commissioner of Central excise which was also dismissed.

Appellant submitted that, Appellant has committed inadvertent mistake by wrongly availing CENVAT credit with no intention to evade payment of duty as Appellant at time of availment of irregular credit used CENVAT credit accumulated in their books of accounts to tune of Rs. 12/- crores whereas CENVAT credit availed was only to the tune of Rs. 18,57,641/- during the relevant period. Further, reversal of wrongly availed CENVAT credit before utilisation amounts to non-availment of CENVAT credit and hence, interest and penalty not payable under Rule 15(1) of CCR, 2004.

Karnataka High Court in case of Commissioner of Central Excise v. Bill Forge observed that, 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. Levy of interest is on actual amount which is withheld and 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 been levied or paid or has been short levied or short paid or erroneously refunded, the person liable to pay duty, shall in addition to the duty is liable to pay interest. Section do not stipulate interest is payable from date of book entry, showing entitlement of Cenvat credit. Interest cannot be claimed from date of wrong availment of CENVAT credit and that interest would be payable from date CENVAT credit is taken or utilized wrongly.

Therefore, in view of ratio of decision of High Court in case of Bill Forge, impugned order was wrong and not sustainable in law and therefore, impugned order was set aside.

Relevant : Commissioner of Central Excise v. Bill Forge


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