Short Delay in CENVAT Debit Not Non-Payment of Duty: CESTAT Quashes ₹12.59 Crore Demand Against ITC Limited [Read Order]

The Kolkata Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that a short delay in debiting CENVAT credit cannot be treated as non-payment of excise duty. The tribunal set aside the Commissioner’s order.

ITC Limited, Paperboards and Specialty Papers Division, Tribeni Unit, discharged its excise duty liability partly through CENVAT credit and partly through cash payment. During departmental scrutiny, it was found that for thirteen months between April 2010 and November 2012, ITC had debited its CENVAT account a few days after the due date, ranging between one day and sixteen days.

The department treated the delay as non-payment of duty and issued a show cause notice demanding the entire amount with interest and penalty. The adjudicating authority confirmed the demand and also imposed a personal penalty on the company’s finance head, Mr. Sanjay Chowdhury.

The appellant’s counsel argued that the delay was unintentional and minor. He explained that sufficient CENVAT credit was available at all times, and that a mere delay in making a debit entry did not amount to non-payment of duty.

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They further argued that the company had already paid Rs. 2,33,784 as interest, which was acknowledged in the show cause notice and the order-in-original. The counsel requested that the appeal be allowed since no loss of revenue had occurred.

The revenue counsel argued that the appellant had debited its CENVAT account after the due date prescribed under the rules, which amounted to non-payment of duty. The counsel justified the Commissioner’s decision to demand the full duty, interest, and penalties, stating that the law required timely debit to discharge duty liability.

The two-member bench comprising R. Muralidhar (Judicial Member) and K. Anpazhakan (Technical Member) observed that ITC had enough CENVAT credit balance at the end of each month and that the only issue was the timing of debit.

The tribunal explained that when sufficient credit is available and the delay is short, the liability can only attract interest, which ITC had already paid. It pointed out that raising a demand of Rs. 12.59 crore in such circumstances was excessive and unjustified since the department suffered no revenue loss.

The tribunal criticized the department’s action as unnecessary and explained that such litigation wastes the time of the assessee, the revenue officers, and the tribunal. It set aside the impugned order entirely and allowed ITC’s appeals, holding that the company was entitled to consequential reliefs as per law.

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