In the case of Hindustan Petroleum Corporation Ltd about the irregularities in reversal of Cenvat Credit, the Mumbai bench of the Customs, Excise & Service Tax Appellate Tribunal(CESTAT) remanded the matter for computation of interest liability for premature availment of credit on capital goods.
The appeal is against the order of Commissioner of Central Excise, Mumbai – II, which is confined to resolution on the correctness of demand having been confirmed under rule 14 of CENVAT Credit Rules, 2004 and even after the reversal of credit of ₹ 1,56,461/- that is alleged to have been irregularly availed against invoices dated 3rd September 2010 and 27th May 2010 and the correctness of disallowance of CENVAT credit on capital goods that, instead of being apportioned over two years, was taken in the very first year.
The appellant placed reliance on the decision of the High Court of Allahabad in Hello Minerals Water (P) Ltd v. Union of India and of the Supreme Court in Chandrapur Magnet Wires (P) Ltd v. Collector of Central Excise, Nagpur. It was also further contended that the decision of the Tribunal in Rana Sugar Ltd v. Commissioner of Central Excise, was upheld by the High Court of Allahabad while dismissing the appeal of Revenue in Commissioner of Central Excise, Meerut –II v. Rana Sugar Ltd holding that with subsequent reversal of credit wrongly taken there was no scope for demanding interest and imposing penalty.
Furthermore, reversal of credit sufficing to relieve the assesse from detriment thereafter was also confirmed by the Supreme Court in re Chandrapur Magnet Wires (P) Ltd.
A two-member bench of Mr C J Mathew, Member (Technical) and Mr Ajay Sharma, Member (Judicial) observed that “Nonetheless, owing to premature availment of credit, interest liability may arise by the decisions cited supra. Furthermore, it is on record that the original authority, while confirming the recoveries proposed in the show cause notice, had also made it a point to note that the reversal of credit has not been verified. “
The Tribunal viewed that ascertainment of the reversal of CENVAT credit as well as computation of interest liability for premature availment of credit on capital goods that were procured need to be verified. The CESTAT set aside the impugned order and remanded the matter to the original authority for those limited purposes.
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