The Allahabad Bench of the Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ) upheld the demand recovery of 5 years in the matter regarding interest on wrongly taken cenvat credit.
The appellant is registered with the Central Excise and engaged in the manufacture of Parts of Vehicles, Parts of Air Conditioners, etc. falling under Chapter Sub-hearing No.8714990 & 8714900, 8415900, 85229000 of first schedule to Central Excise Tariff Act. 1985. They are also availing the benefit of Cenvat credit as provided in the law. During the course of scrutiny of the ER-1 returns anomalies in the closing and opening balance in the abstract of Cenvat Credit Account were noticed.
The explanation given by the appellant was not acceptable and the data regarding amount of Cenvat credit in balance credit availed/taken during the month, utilized and the closing balance given in the ER-1 returns is always based on the factual data. If it was an error, as stated by the appellant the correction would have been made in the subsequent month but in the instant case appellant continued to retain the said inadmissible credit of Rs.6.40 crores during the period from December 2009 to June, 2010 as evident from the ER-1 returns filed for the relevant period. Show cause notice dated 19.09.2011 was issued to the appellant.
The counsel for the appellant submitted that credit before the utilization is in the existent of government hence there is no revenue loss to the government. Accordingly, the demand for interest of such excess credit cannot be sustained.
It is a settled law that interest is a statutory/ contractual liability for the wrongly taken credit or is equivalent to the time value of the money/credit. It is an absolute liability as has been held by the courts in the various decisions for the same no person could claim the benefit and claim that interest as provided by the statute could not have been recovered as has been held the same is barred by limitation.
A Two-Member Bench of PK Choudhary, Judicial Member and Sanjiv Srivastava, Technical Member observed that “It was for the appellant to have paid the interest along with the reversal of the excess credit taken. It is also observed that during the period of dispute section 11A did not provided, for recovery of interest and hence was not applicable. The recovery of interest was made in terms of Section 11AB/ 11AA which did not provided for any limitation.”
“As we have upheld the demand made within the period of five years for recovery, we do not find any merits in the submissions made for not imposition of the penalties imposed under Rule 15, in view of the decision of the Apex Court in the case of Rajasthan Spinning and Weaving Mills Ltd” the Bench noted.
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