The Customs, Excise, and Service Tax Appellate Tribunal ( CESTAT ) Ahmedabad bench has modified its earlier decision in the case of Lyka Labs, ruling that time-barred demands for CENVAT credit do not attract interest.
The decision came after the appellant filed a Rectification of Mistake ( ROM ) application, challenging the imposition of interest on a time-barred demand.
The appellant, Lyka Labs, represented by Adv. Shailesh P Sheth, argued that while the CENVAT credit of ₹60,15,116/- had been reversed, the demand itself was time-barred, and thus, no interest could be charged.
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They contended that the Tribunal had already acknowledged in its February 8, 2024 order that there was no suppression of facts and that the penalty had been rightly set aside. The appellant referred to a Supreme Court judgment in Sunitadevi Singhania Hospital Trust to support their claim that time-bar issues could be addressed under an ROM application.
The Revenue, represented by Rajesh K Agarwal, opposed the ROM application, maintaining that the Tribunal had consciously ordered the payment of interest and that the order did not suffer from any apparent errors.
After reviewing the arguments, the bench of Ramesh Nair (Accountant member) and C L Mahar (Technical member) noted that in its previous order, it had prima facie held the demand to be time-barred but upheld the payment of the reversed CENVAT credit as it was not contested by the appellant.
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The Tribunal observed that since the demand was time-barred and no suppression of facts was established, the consequential interest liability could not be sustained. The imposition of interest in the original order was deemed an error apparent on record, necessitating rectification.
Accordingly, the Tribunal held that the appellant was not liable to pay interest on the reversed CENVAT credit amount of ₹60,15,116/-. The ROM application was allowed, and the order was modified to this extent, setting aside the demand for interest. This decision reinforces the principle that time-barred demands do not carry an associated interest liability.
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