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CX – It is trite law that interest cannot be demanded if assessee did not utilize Cenvat credit or if there was sufficient credit in books of accounts; demand raised seeking such reversal is unsustainable: CESTAT

2019-TIOL-2473-CESTAT-BANG

IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
REGIONAL BENCH, BANGALORE
COURT NO. 1

Appeal Nos. ST/21603/2017-SM, ST/21604/2017-SM

Arising out of Order-in-Appeal No. COC-EXCUS-000-APP-89/2017-ST, Dated: 19.04.2017
Passed by Commissioner Of Central Excise, Customs and Service Tax , COCHIN( Appeal)

Arising out of Order-in-Appeal No. COC-EXCUS-000-APP-399-16-17, Dated: 30.12.2016
Passed by Commissioner Of Central Excise, Customs and Service Tax , COCHIN (Appeal)

Date of Hearing: 24.04.2019
Date of Decision: 24.04.2019

M/s BHARAT SANCHAR NIGAM LTD
BSNL CTO BUILDING KARAKKATT ROAD
KOCHI – 682016 KERALA

Vs

COMMISSIONER OF CENTRAL TAX AND CENTRAL EXCISE
COCHIN C R BUILDINGS, I S PRESS ROAD
COCHIN-682018 KERALA

Appellant Rep by: Mr Raghavendra, Adv.
Respondent Rep by: Mr M Sharan, Asst. Commissioner, AR

CORAM: S S Garg, Member (J)

ST – The assessee is a Public Sector Undertaking engaged in rendering of telecommunication service and are availing CENVAT credit of duty paid on various inputs and capital goods and also Service Tax paid on various input services – During period from October 2005 to September 2006, assessee procured various capital goods and availed CENVAT credit of duty paid on said capital goods – The allegation against assessee is that they have availed 100% CENVAT credit on capital goods instead of only 50% of the credit – Issue is no more res integra and has been settled by jurisdictional High Court of Karnataka in case of Bill Forge 2011-TIOL-799-HC-KAR-CX wherein the High Court has held that the assessee is not liable to pay interest if he has not utilized the CENVAT credit and there was sufficient CENVAT credit in books of assessee during the relevant time – Further, the Tribunal in case of J.K. Tyres and Industries Ltd. 2016-TIOL-1781-CESTAT-BANG-LB has also held that interest is not payable on mere availment of credit – It has also been consistently held by Tribunal relying upon the decision in case of Bill Forge that interest and penalty is not imposable when the credit is reversed before utilization – By following the ratio of said decisions, the impugned order is not sustainable in law: CESTAT

Appeal allowed

Case laws cited:

M/s. Ind swift Laboratories Ltd – 2011-TIOL-21-SC-CX… Para 4

Commissioner of Central Excise, Bangalore v. Bill Forge Pvt. Ltd – 2011-TIOL-799-HC-KAR-CX… Para 4

Commissioner of Central Excise v. Strategic Engineering Pvt. Ltd – 2014-TIOL-466-HC-MAD-CX… Para 4

Commissioner of Central Excise, Coimbatore v. Sri Kumaran Alloys (P) Ltd – 2018-TIOL-1820-HC-MAD-CX… Para 5

Commissioner of Central Excise, Raipur v. Vandana Vidyut Ltd., 2016 (331) ELT 231 (Chhattisgarh)… Para 5

Commissioner of Central Excise, Surat-II v. Atul Ltd – 2017-TIOL-1570-CESTAT-AHM… Para 5

J.K. Tyres and Industries Ltd – 2016-TIOL-1781-CESTAT-BANG-LB… Para 6

FINAL ORDER NOS. 20360-20361/2019

Per: S S Garg:

The appellants have filed these two appeals directed against the impugned order dated 30.12.2016 and 19.04.2017 passed by the Commissioner (Appeals) whereby the Commissioner (Appeals) in Appeal No. 21604/2017 has rejected the appeal of the appellant whereas in Appeal No. 21603/2017, the Commissioner (Appeals) on Revenue’s Appeal has enhanced the penalty from Rs.100/- to Rs.10,000/- under Rule 15(1) of the CCR, 2004. Since the issues in both the cases are interconnected therefore both the appeals are being disposed of by this common order.

2. Briefly the facts of the present case are that the appellant is a Public Sector Undertaking engaged in rendering of telecommunication service and are availing the CENVAT credit of duty paid on various inputs and capital goods and also Service Tax paid on various input services. During the period from October 2005 to September 2006, the appellant procured various capital goods and availed CENVAT credit of duty paid on the said capital goods. The allegation against the appellant is that they have availed 100% CENVAT credit on capital goods instead of only 50% of the credit. A SCN dated 29.04.2011 was issued to the appellants proposing to demand interest of Rs.13,53,777/- on the amount of CENVAT credit of Rs.2,51,72,115/- from the actual date of taking credit till the date on which credit is eligible under Rule 14 of the CCR, 2004 read with Section 75 of the Finance Act, 1994. The SCN also proposed to impose penalty under Rule 15(1) of the CCR, 2004. After following the due process, the Additional Commissioner confirmed the demand of interest of Rs.13,53,777/- under Rule 14 of CCR, 2004 read with Section 75 of the Finance Act and also imposed penalty of Rs.100/- on the appellant under Rule 15 (1) of the CCR, 2004. Subsequently, the Additional Commissioner vide Corrigendum dated 03.07.2013 reduced the interest from Rs.13,53,777/- to Rs.6,99,525/- confirmed under Rule 14 of the CCR, 2004 read with Section 75 of the Finance Act which was challenged before the Commissioner (Appeals) who vide the impugned order dated 30.12.2016 rejected the appeal of the appellant. The Department has also filed appeal before the Commissioner (A) for not imposing appropriate penalty on the appellant under Rule 15 (1) of the CCR, 2004. The Commissioner (A) enhanced the penalty from Rs.100/- to Rs.10,000/- which has also been challenged by the appellant.

3. Heard both the parties and perused the records.

4. Learned Counsel for the appellants submitted that the impugned order is not sustainable in law as the same has been passed without properly appreciating the facts and the law. He further submitted that the impugned order demanding interest under Rule 14 of the CCR, 2004 is based on the Apex Court decision in the case of M/s. Ind swift Laboratories Ltd. reported in – 2011-TIOL-21-SC-CX. He further submitted that the said decision of the Apex Court is not applicable in the facts and the circumstances of the case and has been distinguished by the Hon’ble Karnataka High Court in the case of Commissioner of Central Excise, Bangalore v. Bill Forge Pvt. Ltd. reported in 2012 (279) ELT 209 (Kar.) = 2011-TIOL-799-HC-KAR-CX wherein the Hon’ble High Court after considering the decision of the Apex Court in the case of Ind Swift Laboratories (supra) has held that no interest is payable on mere availment of credit without utilization. He further submitted that in the present case, it is an admitted fact that the appellant has only availed the credit which was not utilized and therefore, as per the decision of the Hon’ble High Court, the appellant is not liable to pay the interest. The appellant has also relied upon the decision of the Hon’ble Madras High Court in the case of Commissioner of Central Excise v. Strategic Engineering Pvt. Ltd., 2014 (310) ELT 509 (Mad.) = 2014-TIOL-466-HC-MAD-CX wherein the Hon’ble Madras High Court in Para 11 has held as under:

“It is an admitted fact that Rule 14 of the CENVAT Credit Rules has been subsequently amended, wherein it has been clearly stated as “taken and utilized”. Therefore, it is quite clear that mere taking itself would not compel the assessee to pay interest as well as penalty. Further, as pointed out earlier, the subsequent amendment has given befitting answer to all doubts existed earlier. Since, the subsequent amendment has cleared all doubts existed earlier in respect of Rule 14 of the said Rules, it is needless to say that the argument advanced by the learned counsel appearing for the appellant/Department is erroneous, whereas the argument advanced on the side of the respondent is really having merit and the substantial questions of law settled in the present Civil Miscellaneous Appeal are not having substance and altogether the present Civil Miscellaneous Appeal deserves to be dismissed.”

5. On the other hand, Learned AR defended the impugned order and submitted that the appellant is liable to pay interest as he has wrongly availed the credit. In support of his submission, he relied upon the following decisions:

– Commissioner of Central Excise, Coimbatore v. Sri Kumaran Alloys (P) Ltd., 2019 (365) ELT 305 (Mad.) =2018-TIOL-1820-HC-MAD-CX.

– Commissioner of Central Excise, Raipur v. Vandana Vidyut Ltd., 2016 (331) ELT 231 (Chhattisgarh).

– Commissioner of Central Excise, Surat-II v. Atul Ltd., 2017 (358) ELT 825 (Tri. Ahmd.) = 2017-TIOL-1570-CESTAT-AHM.

6. After considering the submissions of both the parties and perusal of the material on record, I find that this issue is no more res integra and has been settled by the jurisdictional High Court of Karnataka in the case of Bill Forge (supra) wherein the Hon’ble High Court has held that the assessee is not liable to pay interest if he has not utilized the CENVAT credit and there was sufficient CENVAT credit in the books of the assessee during the relevant time. Further, the Larger Bench of the Bangalore Tribunal in the case of J.K. Tyres and Industries Ltd., 2016 (340) ELT 193 (Tri. LB) = 2016-TIOL-1781-CESTAT-BANG-LB has also held that interest is not payable on mere availment of credit. It has also been consistently held by this Tribunal relying upon the decision of the Hon’ble Karnataka High Court in the case of Bill Forge (supra) that interest and penalty is not imposable when the credit is reversed before utilization. By following the ratio of the above said decisions, I am of the considered view that the impugned order is not sustainable in law in both the cases and therefore I set aside the impugned order by allowing the appeal of the appellant with consequential relief, if any.

(Operative portion of the Order was pronounced in Open Court on 24.04.2019)

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