By TIOL News Service

NEW DELHI, JULY 30, 2013: THE appellants are engaged in manufacture of sugar and were availing the benefit of Cenvat credit of duty paid on various inputs as also on capital goods. However, while availing the Cenvat credit in respect of capital goods, it seems that they availed the credit in respect of those items which according to the Revenue were not capital goods ,. The said fact was pointed out by the audit and the appellant accepted the same and reversed the excess availed credit.

The dispute is whether such excess availed credit which was reversed by the assessee , even before utilization, would attract interest and penalty or not.

Commissioner (Appeals) vide his impugned order has held that since the assessee reversed the credit before utilization, and the same remains only as a book entry, no interest would be leviable.However, he imposed penalties upon the assessee for availing inadmissible credit. The said order of Commissioner (Appeals) stand appealed against by the Revenue as also by the assessee.

The Tribunal noted that the Supreme Court in the case of Union of India vs. Ind -Swift Laboratories Ltd. reported as 2011-TIOL-21-SC-CX laid down that interest would be leviable from the date of wrong availment of credit. This decision was considered by the Karnataka High Court in the case of Commissioner of Central Excise & Service Tax Bangalore vs. Bill Forge Pvt. Ltd. - (2011-TIOL-799-HC-KAR-CX)and it was held that said Supreme Court decision relate to taking of credit or utilizing the same wrongly and cannot apply to availment of Cenvat credit in the account books.

The Tribunal observed,

"By following the said decision of the Hon'ble Supreme Court, the Hon'ble Karnataka High Court, in an identical set of facts held that the assessee had not taken or utilized the Credit but only availed wrong credit in their account books and on pointing out the mistake, immediately reversed the entry. As no benefit of wrong entry in account books was taken, interest is not payable."

Penalty for wrong Credit: The contention of the assesse is that once they reversed the credit, it amounts to as if it was never taken. For the above proposal, he relies upon the Supreme Court decision in the case of Commissioner of Central Excise, vs. Bombay Dyeing and Mfg. Co. Ltd. reported as (2007-TIOL-115-SC-CX) as also on Allahabad High Court decision in the case of Hello Minerals Water Pvt. Ltd. vs. Union of India - (2004-TIOL-57-HC-ALL-CX).

The Tribunal observed,

"Admittedly penal provisions are invokable , once there is a malafide on the part of the assessee.In the present case, the show cause notice does not attribute any malafide intention to the appellant so as to invoke the penal provisions of Section 11AC.The arguments of the learned DR is that since 11AC stand invoked that itself is sufficient to attribute malafide to the appellant, cannot be appreciated inasmuch as there has to be element supported by evidence to invoke the provisions of Section 11 AC itself ."

Revenue Appeals Dismissed and appeals of assesses allowed.

(See 2013-TIOL-1142-CESTAT-DEL)