1. The present appeal is directed against the impugned order dated 25.2.2014 passed by the Commissioner, whereby the Commissioner has disallowed the wrongly availed cenvat credit and also appropriated the amount already reversed by the appellant. The Commissioner has also confirmed the demand for interest and also imposed equal penalty under Rule 15(3) of the Cenvat Credit Rules, 2004 read with Rule 78 of the Finance Act, 1994.
2. Briefly the facts of the present case are that the appellant is engaged in providing taxable services falling under the category of port services and is discharging the service tax from time to time. During the scrutiny of records and annual financial statement maintained by the appellant, it was observed that during the period 2008-09 and 2009-10, the appellant had availed cenvat credit on structural materials such as MS plates, beams, angles, channels etc. falling under Chapter 72 of the Central Excise Tariff Act, 1985, which were used for civil construction and conveyor system. Thereafter the appellant on its own volition had paid/reversed the entire cenvat credit worth Rs. 1,21,07,882/- attributable to such inputs on 30.4.2010 and 15.9.2010 before the issuance of show cause notice dated 3.10.2013. The department vide order-in-original dated 25.2.2014 asked the appellant to pay interest of Rs. 16,89,878/- on such wrong availment of credit and also imposed penalty of Rs. 1,21,07,882/-. Aggrieved by the said order, the appellant filed appeal before the Commissioner and the Commissioner also rejected the appeal by holding that the appellant is liable to pay interest and penalty. Hence the present appeal.
3. Heard both the parties and perused the records.
4. Learned counsel for the appellant submitted that the impugned order is not sustainable in law as the same has been passed without considering the binding judicial precedent. He further submitted that the appellant is not liable to pay interest as the appellant had only taken cenvat credit in their books of accounts but had not utilized the same for payment of service tax as can be seen from ST-3 returns. He also submitted that the appellant had sufficient balance in their cenvat credit account and had not utilized the wrongly availed credit. In support of his submission, he relied upon the decision of Hon'ble Karnataka High Court in the case of CCE vs. Bill Forge Pvt. Ltd : 2012 (26) STR 204 (Kar.) which has held that if the cenvat credit is wrongly availed and not utilized, then the assessee is not liable to pay interest and penalty. He further submitted that the Revenue has invoked extended period of limitation wrongly. For invoking extended period of limitation, there has to be suppression of facts or fraud or collusion or willful misstatement or contravention of any provision of law with intent to evade payment of tax whereas in the present case, the appellant reversed the wrongly availed credit before issue of show cause notice and also not utilized the same. He further submitted that since there was no suppression or fraud, no penalty can be imposed on the appellant. For this, he relied upon the decisions in the case of CCE vs. Jatti Motors Pvt. Ltd. 2016 (44) STR J69 (Kar.) and Lanco Industries vs. CCE : 2012 (25) STR 206 (Tri.-Bang.).
5. On the other hand, learned AR supported the impugned order and submitted that the appellant had wrongly taken the cenvat credit and the same was reversed only when the department pointed out the wrong availment of cenvat credit.
He further submitted that though the appellant had reversed the cenvat credit, but they are still liable to pay interest and penalty. He further submitted that the decision of Hon'ble Karnataka High Court in the case of Bill Forge (supra) is not applicable in the present case. He also submitted that the jurisdictional High Court of Bombay in the case of CCE, Pune-I vs. GL & V India Pvt. Ltd: 2015 (321) ELT 611 (Bom.) has distinguished the Bill Forge decision and has held that the assessee is liable to pay interest as per the judgment of Hon'ble Supreme Court in the case of UOI vs. Ind-Swift Laboratories Ltd : 2011 (265) ELT 3 (SC).
6. After considering the submissions of both the parties and perusal of the material on record, we find that the appellant had reversed the irregular cenvat credit taken by them on being pointed out by the Revenue. We also find that the cenvat credit was reversed before the issuance of show cause notice. Further, we find that the appellant is liable to pay interest for irregular availment of cenvat credit in view of the judgment of Hon'ble Bombay High Court in the case of GL & V India cited supra, wherein the Hon'ble High Court in para 12 to 15 has observed as under:-
12. It could thus clearly be seen that while interpreting Rule 14 the Apex Court has clearly held that if the interpretation as placed by the Punjab and Haryana High Court was to be accepted, the same would amount to permitting the word or between taken and utilized to be substituted by and. The Lordships therefore found that applying the principle of strict and liberal interpretation the same was not permissible.
13. In view of the clear pronouncement of law by the Apex Court, we find that the view taken by the learned Tribunal may be though correctly taken at that point of time, on the basis of the judgment of the Punjab & Haryana High Court, would no longer be correct in view of the subsequent judgment of the Apex Court in the case of Union of India v. Ind-Swift Laboratories Ltd. reported in : 2011 (265) E.L.T. 3 (S.C.).
14. In so far as the issue raised by Mr. Sridharan, learned senior counsel with regard to the error committed by the authority in not construing Rule 3 of the 2004 Rules correctly is concerned, there is no finding by the learned Tribunal to that effect in the impugned order and therefore, it would not be appropriate for us to go into that question. In any case, that question pertains to decision on the factual position as obtained in the matter and therefore, it will be beyond our jurisdiction to decide a matter which is basically based on factual situation. We, therefore, find that it will be appropriate if the said issue is decided by the learned Tribunal.
15. In so far as the judgment of the Karnataka High Court is concerned, it appears that the said judgment is delivered by the Karnataka High Court on the facts of the said case. It would be relevant from the facts as stated in the said judgment that upon the mistake being brought to the notice of the assessee regarding the erroneous availment of the Cenvat credit, the assessee accepted the mistake and immediately reversed the entry. In the present case, the reversal of the entry is after a period of ten months. In that view of the matter, we find that even on facts, the said judgment is distinguishable.
6.1 We also find that the judgment of Hon'ble Karnataka High Court in the case of Bill Forge Pvt. Ltd. is not applicable in view of Hon'ble Bombay High Court judgment which has distinguished Hon'ble Karnataka High Court judgment of Bill Forge Pvt. Ltd. and has also followed Hon'ble Supreme Court judgment in the case of UOI vs. Ind-Swift Laboratories Ltd. cited supra. Therefore, by following the ratio of Hon'ble Bombay High Court judgment, w
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e hold that the appellant is liable to pay interest of Rs. 16,89,878/- for wrong availment of cenvat credit. Further, we find that though the Revenue has invoked the extended period of limitation, but they have not been able to bring on record any material which shows that there was suppression of fact or fraud or collusion or willful misstatement with intent to evade payment of tax. We also find that the wrongly availed credit was reversed before the issue of show cause notice and, therefore, we are of the opinion that there was no intention to evade and, therefore, we drop the penalty by relying upon the decision in the case of CCE vs. Jatti Motors Pvt. Ltd. and Lanco Industries Ltd. cited supra. 7. Consequently, the appeal is partly allowed and the interest liability is upheld and penalty is dropped.