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2009 Supreme(P&H) 1074
PUNJAB & HARYANA HIGH COURT
T.S.Thakur and Hemant Gupta JJ.
Ind-swift Laboratories Ltd.
Versus
Union Of India
Civil Writ Petition No. 13860 of 2007,
Decided On : JULY 3, 2009
The main legal point established in the judgment is that interest on wrongly availed CENVAT credit is payable from the date it is utilized, not from the date of wrong availment, and that the respondents cannot claim interest on specific amounts deposited earlier.
Headnote:
CENVAT Credit - Central Excise - Central Excise Act, 1944 Section 11AB, Cenvat Credit Rules, 2004 Rule 3, Rule 4, Rule 14 - The court discussed the provisions of Section 11AB of the Central Excise Act, 1944, and Rules 3, 4, and 14 of the Cenvat Credit Rules, 2004. It interpreted the conditions for allowing CENVAT credit, the recovery of wrongly taken or erroneously refunded CENVAT credit, and the liability to pay interest in case of delayed payment of duty.
Fact of the Case:
The petitioner, a drug manufacturer, challenged an order to deposit a balance amount of interest in pursuance of wrongly availed CENVAT credit. The Settlement Commission settled the proceedings initiated by a show cause notice, granting immunity from penalty but ordering payment of simple interest on the wrongly availed CENVAT credit.
Finding of the Court:
The court found that interest is not payable on the amount of CENVAT credit availed of and not utilized. It held that interest cannot be claimed from the date of wrong availment of CENVAT credit, but shall be payable from the date it is wrongly utilized. The court also ruled that the respondents wrongly claimed interest on the CENVAT credit from the date it was wrongly availed and were not entitled to claim interest on a specific amount deposited earlier.
Issues: The issues revolved around whether interest is payable from the date CENVAT credit was wrongly availed or until the date the duties were actually paid, and whether a specific deposit led to cessation of interest or if interest was payable until a later date.
Ratio Decidendi: The court interpreted the provisions of the Central Excise Act, 1944 and the Cenvat Credit Rules, 2004 to determine the liability to pay interest in case of delayed payment of duty and the conditions for allowing and recovering CENVAT credit.
Final Decision: The court disposed of the writ petition with a direction to the respondents to re-calculate the amount of interest in line with the court's observations.
Hemant Gupta, J.
1. The challenge in the present writ petition is to the order, Annexure P-11, dated 16-8-2007 calling upon the petitioner to deposit a sum of Rs. 49,27,473/- towards the balance amount of interest in pursuance of the order passed by the Settlement Commission on 19-1-2007.
2. The petitioner company is engaged in the manufacture of bulk drugs classifiable under Chapter 30 of the First Schedule to the Central Excise Tariff Act, 1985 (for short #28;the Tariff Act#29;). The petitioner during 1-11-2001 to 31- 3-2006 received invoices. On the basis of such invoices, the petitioner claimed CENVAT credit of Rs. 6,50,44,412/-. Out of the said amount, the petitioner utilized credit of Rs. 5,71,47,148/- only. On 8-3-2006, staff of the Director General of Central Excise Intelligence searched factory as well as corporate office of the petitioner. The Directors of the company admitted wrong availment of above-said CENVAT credit. It is the case of the petitioner that a sum of Rs. 4 crores was deposited through 8 TR-6 challan in the month of March, 2006. In November 2006, the petitioner reversed CENVAT amounting to Rs. 1,45,67,660/-. The petitioner also deposited a sum of Rs. 25,79,488/- through RG 23A Pt-II vide entry Nos. 1766, 1767 and 1768 dated 22-2-2006. Thus, total sum of Rs. 5,71,47,148/- was deposited towards wrongly availed CENVAT credit.
3. The petitioner was served with a show cause notice on 8-12-2006 to recover the amount of Rs. 5,66,35,470/- as excise duty and Rs. 5,11,678/- as education cess fraudulently availed by the petitioner under Rule 12 of the CENVAT Credit Rules, 2001-02 and Rule 14 of CENVAT Credit Rules, 2004 read with Section 11A of the Central Excise Act, 1944 (for short #28;the Act#29;). It was also proposed as to why a sum of Rs. 5,71,47,148/- already deposited by the petitioner should not be appropriated against the credit demanded. The show cause notice was also served for imposition of penalty and interest.
4. The petitioner invoked the jurisdiction of the Custom and Central Excise Settlement Commission on 21-11- 2006 under Section 32E(2) of the Central Excise Act, 1944 . The Settlement Commission passed an order on 19-1- 2007 settling the proceedings initiated by the aforesaid show cause notice. No further duty was payable over and above the amount deposited i.e., Rs. 5,71,47,148/-. There was immunity granted from penalty. However, in respect of interest, Settlement Commission ordered as under :-
#28;Immunity from interest in excess of 10% simple interest per annum is granted. Accordingly, the applicant shall pay simple interest @ 10% per annum on CENVAT credit wrongly availed (i.e. Rs. 5,71,47,148/-) from the dates the duty became payable as per Section 11AB of the Act till the dates of payment. Revenue is directed to calculate the amount of interest as per this order and intimate the same to the applicant within 15 days of the receipt of this order. Thereafter, the applicant shall pay the amount of interest within 15 days of the receipt of the said intimation and report compliance both to the Bench and to Revenue#29; .
5. On 22-3-2007, the petitioner was called upon to deposit interest amounting to Rs. 1,47,90,065/- as the amount of Rs. 4 crores was said to be actually debited by the petitioner on 31-1-2007 in its Personal Ledger Account. It was also communicated that interest liability is to be calculated from the date of wrong availment of credit and not from its utilization. The petitioner moved a miscellaneous application before the Settlement Commission for clarification of its order so as to quantify the actual interest liability. The Settlement Commission held that interest is payable from the date CENVAT credit was wrongly availed and not from the date of utilization of a part of balance of such credit. It was also found that such issue was not raised in the settlement proceedings, therefore, final order passed in the matter was conclusive and the same cannot be reope
