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2024 Supreme(Online)(GUJ) 18054
HIGH COURT OF GUJARAT
MR. JUSTICE BHARGAV D. KARIA, MR. JUSTICE NIRAL R. MEHTA, JJ
COMMISSIONER OF CENTRAL EXCISE – Appellant
Versus
SHRI GAUTAM SHIP BREAKING IND. LTD. – Respondent
R/TAX APPEAL NO. 1411 of 2005
Interest cannot be charged on unutilized modvat credit when it is determined that the credit was wrongly taken.
Headnote:(A) Central Excise Act, 1944 - Section 35G - Central Excise Rules, 1944 - Rule 57AH (now Rule 12 of the Central Excise Rules, 2002) - Interest on wrongly taken credit - The Tribunal held that fuel oil and foodstuff on board ship are not inputs for manufacture of scrap, thus modvat credit is not admissible - Charging of interest on unutilized credit is not sustainable. (Paras 5, 6, 8)
(B) Appeal - The substantial question of law regarding interest chargeability on wrongly taken credit does not arise as the issue is covered by precedent. (Paras 4, 7)
Facts of the case:
The appellant challenged the Tribunal's decision denying modvat credit for fuel oil and foodstuff, asserting that interest should not be charged on unutilized credit.
Findings of Court:
The Tribunal's finding that interest cannot be levied on unutilized credit was upheld, affirming that the appellant is not liable for interest.
Issues: The main issue was whether interest is chargeable under the relevant rules for wrongly taken credit.
Ratio Decidendi: The court concluded that the Tribunal's decision was correct, as no substantial question of law arose from the order, which was consistent with prior rulings.
Result: Appeal dismissed.
(PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA)
1. Heard learned advocate Mr. Hirak Shah for learned advocate Mr. Nikunt K. Raval for the appellant.
2. By this appeal under section 35G of the Central Excise Act, 1944 arising out of order dated 06.04.2005 passed by the Customs, Excise and Service Tax Appellate Tribunal, West Zone Bench, Mumbai (For short “the Tribunal”),
following substantial question of law is admitted by this Court vide order dated 21.09.2006:
- “Whether the interest is chargeable under Rule 57AH of Central Excise Rules 1944 (now Rule 12 of the Central Excise Rules, 2002) on the credit wrongly taken?”
3. While admitting the appeal, this Court observed that the issue is covered by the decision of this Court in case of Commissioner of Central Excise vs. Gupta Steel ( Tax Appeal No.1145 of 2005 ), however, as SLP preferred by the appellant was pending before the Hon’ble Supreme Court, the appeal was admitted by this Court.
4. Learned advocate Mr.Hirak Shah for learned advocate Mr. Nikunt Raval for the appellant submitted that the Hon’ble Supreme Court by order dated October 24, 2018, considering the low tax effect involved in the case declined to entertain the appeal in case of Commissioner of Central Excise Bhavnagar v. M/s Gupta Steel and dismissed the Civil Appeal No. 10821 of 2010 keeping the question of law to be agitated in appropriate case.
5. In the present case, the Tribunal has held as under :
- “2. The authorities below upheld that the fuel oil and foodstaff on board ship are not inputs required directly or indirectly or in relation to manufacture of scrap emerging from the breaking of the ship. On this basis, it has been held that modvat credit is not admissible to the appellant. It has also been held that charging of interest on the amount of credit lying unutilised is not sustainable.”
6. This Court in case of Commissioner of Central Excise vs. Gupta Steel while dealing with a similar question has held as under:
- “2. Three show-cause notices under Rule 57AH (now Rule 12 of Cenvet Rules) read with Section 11A and Section 38-A of the Central Excise Act, 1944 and interest under Section 11AB of the Central Excise Act, 1944, were issued to the respondent- assessee for having wrongly taken credit of additional custom duty paid on bunker, foodstuff etc. The Assistant Commissioner confirmed the demand raised in the show cause notices vide order in Original No.BVR/46- 48/2003, dated March 31,
2003. Aggrieved by the said order, the assessee preferred an appeal before the Commissioner(A), Central Excise, Rajkot, who rejected the appeal by order dated July 18, 2003.
Thereupon, the assessee preferred an appeal before CESTAT, WZB, Mumbai.
The appeal was dismissed by order dated October 31, 2003. Thereafter, the assessee filed an application for rectification of mistake, and pointed out that points regarding non-chargeability of interest on unutilized cenvat credit were not considered. The CESTAT, Mumbai allowed the application by order dated January 4, 2005. Aggrieved by the said order, the appellant has filed the instant appeal.
3. This Court has heard Mr.J.M.Malkan, learned Assistant Solicitor General of India, at length and in detail.
4. The finding recorded by the Tribunal is as under :
- “We have considered the rival submissions. We find that while it has been held that fuel oil and food stuff on board ship are not inputs required directly or indirectly or in relation to manufacture of scrap emerging from the breaking of the ship, and therefore, not eligible for modvat credit, there is no specific finding on whether interest can be levied on the amount of credit, which has been directed to be reversed. The direction for reversal itself would establish the correctness of the contention of the submissions that the credit was not availed by them but lying unitized.
- In these circumstances charging of interest on the amount of credit lying unutilized is not correct in law. We, therefore hold that the applicants are not l
