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CX - Credit taken but not utilized till reversal - Mere taking of CENVAT credit facilities would not compel assessee to pay interest as well as penalty: CESTAT

 

By TIOL News Service

CHENNAI, JULY 21, 2018: ASSESSEE is manufacturer of computers and availing CENVAT credit of duty paid on inputs and input services. On verification of their accounts, it was noticed that during the period 2007-08 and 2008-09 they have wrongly availed CENVAT credit of duty on input services twice on the same set of invoices. On being pointed out, assessee admitted and informed that they had reversed the amount of Rs.78,81,372/- along with education cess and secondary and higher education cess. Since the wrongly availed credit was reversed immediately, they informed that the payment of interest is not applicable for the reason that they continue to retain credit balance over and above the impugned wrongly availed credit.

SCN was issued proposing to demand interest and for penalty in terms of Rule 15(1) of CCR, 2004. After due process of law, the adjudicating authority confirmed the demand of interest and imposed penalty under Rule 15(1).

Assessee is now before the Tribunal.

Appellant submitted that they are continuously maintaining sufficient CENVAT credit balance which is increasing year by year due to inverted duty structure; that the wrong availment of credit took place due to software system and internal control errors; that though the assessee wrongly availed the credit but hand not utilized the same and they were having credit over and above the wrongly availed credit.

The issue - whether the CENVAT credit availed wrongly and reversed subsequently without actually using it would attract interest or not has been decided by jurisdictional High Court in case of Strategic Engineering - 2014-TIOL-466-HC-MAD-CX wherein the High Court has observed that mere taking (of credit) itself would not compel the assessee to pay interest as well as penalty.

Respectfully following the decision of High Court of Madras, Tribunal held that the assessee is not liable to pay interest or penalty. The impugned order is set aside and the appeal is allowed with consequential relief, if any.

(See 2018-TIOL-2232-CESTAT-MAD)


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