The Chennai bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that the interest liability cannot be raised on merely availed CENVAT credit and reversed before the utilization for remittance of excise duty.
Mobis India Ltd, the appellant assessee was a manufacturer of Motor Vehicle Parts and is availing CENVAT Credit of the duty paid on inputs, input services, and capital goods for payment of duty on their final products.
The assessee appealed against the order passed by the Commissioner (Appeals) for confirming the excise duty demand and recovery of appropriate interest on the above demand.
K. Senguttuvan, the counsel for the assessee contended that no interest would become liable to be paid in case wrongly availed CENVAT Credit was reversed without utilizing the same.
Also submitted that in case of wrong availment of CENVAT Credit if the entry was reversed it amounts to not taking the credit at all and so the question of payment of interest would not arise.
R. Rajaraman, the counsel for the department contended that the interest was payable on wrong availment / mere taking of ineligible credit and the demand raised by the department was as per the law and liable to be sustained.
The Bench observed that in the case of J.K. Tyre and Industries Ltd. Vs. Assistant Commissioner of Central Excise, the court held that the interest liability would not arise when the assessee had merely availed credit and had reversed the same before utilizing the availed credit for remittance of duty.
The two-member bench comprising Sulekha Beevi (Judicial) and Vasa Seshagiri Rao (Technical) upheld the wrongly availed CENVAT credit demand and quashed the demand of recovery of interest on such ineligible CENVAT Credit by the assessee.
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