By TIOL News Service

CHENNAI, APR 11, 2014: THE Supreme Court in the case of Union of India VsInd -Swift Laboratories Ltd ., 2011-TIOL-21-SC-CX held that on the happening of any of the three circumstances viz., credit taken or credit utilized wrongly or credit has been erroneously refunded, then such credit becomes recoverable along with interest.

Thereafter the Karnataka High Court in the case of Commissioner of Central Excise & Service Tax, LTU. Bangalore Vs Bill Forge Pvt. Ltd (2011-TIOL-799-HC-KAR-CX) after discussing the decision of the Supreme Court in Ind -Swift Laboratories Ltd and held that Interest is not payable if Credit taken is reversed before utilization.

The Madras High Court in the case of The Commissioner of Central Excise, Chennai-IV Vs M/s Sundaram Fasteners Ltd (2014-TIOL-201-HC-MAD-CX) followed the decision of the Supreme Court in Ind -Swift Laboratories Ltd and held that Interest is payable even where Credit taken is reversed before utilization.

Rule 14 of Cenvat Credit Rules, 2004, was amended through Notification No 18/2012 -CE (NT) dated 17.03.2012 with effect from March 17, 2012, whereby the words ‘'taken or utilised wrongly'' were replaced with the words ‘'taken and utilised wrongly''.

In the latest decision rendered on February 10, 2014, the Madras High Court in the case of The Commissioner of Central Excise, Madurai Vs Strategic Engineering Pvt Ltd held that theassessee is not liable to pay Interest and Penalty if Credit taken is reversed before utilization by relying on the subsequent amendment made to Rule 14 of Cenvat Credit Rules, 2004 with effect from March 17, 2012.

The Madras High Court held that the subsequent amendment made to Rule 14 of Cenvat Credit Rules, 2004, has given befitting answer to all doubts existed earlier as to whether Interest and Penalty are payable if Credit taken is reversed before utilization. The departmental appeal was thus dismissed.

(See 2014-TIOL-466-HC-MAD-CX)