Liability of interest where CENVAT credit was wrongly taken but reversed by assessee before utilization
Circular No. 897/17/2009-CX, dated 3-9-2009
Representation has been received from the field formation stating that the decision of Hon'ble High Court of P&H in the case of CCE, Delhi III V/s Maruti Udyog Ltd. [2007(214)ELT173(P&H)], has upheld the order of Tribunal wherein it was held that assessee is not liable to pay interest in the case where credit was only taken and not utilized. The SLP against this order has been dismissed by the Hon'ble Supreme Court. On the other hand, Rule 14 of The CENVAT Credit Rules, 2004, provides for recovery of credit taken or utilized wrongly with interest. In view of this conflict in legal provisions and the decision of Hon'ble Supreme Court, a clarification has been requested from the Board.
2. The matter has been examined. It is seen that the Tribunal decision and the High Court judgement referred to above, was delivered in the context of erstwhile Rule 57I of the Central Excise Rules, 1944 and that the Supreme Court order under reference is only a decision and not a judgement. Since, the Rule 14 of the CENVAT Credit Rules, 2004, is clear and unambiguous in the position that interest would be recoverable when CENVAT credit is taken or utilized wrongly, it is clarified that the interest shall be recoverable when credit has been wrongly taken, even if it has not been utilized, in terms of the wordings of the present Rule 14.
3. Trade & Industry as well as field formations may be suitably informed.
4. Receipt of this circular may kindly be acknowledged.
Revenue clarifies that Interest liability is triggered if Cenvat credit is wrongly taken though not utilized
The Central Board of Excise and Customs has issued Circular No. 897/17/2009-CX ('Board Circular') on September 3, 2009 clarifying that liability to interest would arise where CENVAT credit is wrongly taken but reversed by the taxpayer even before utilization.
Rule 14 of the CENVAT Credit Rules, 2004 ('CENVAT Rules') provides for recovery of credit taken or utilized wrongly along with interest.
In the case of CCE vs Maruti Udyog Limited [2007 (214) ELT 173 (P&H)], the High Court had held that the taxpayer is not liable to pay interest where credit was taken but not utilized. The Special Leave Petition ('SLP') against this order was dismissed by the Hon'ble Supreme Court.
The Board observed that the High Court decision in Maruti Udyog Limited was delivered in the context of erstwhile Rule 57-I of the Central Excise Rules, 1944 ('Erstwhile Rules') and that the dismissal of the SLP by the Supreme Court was not a judgment.
The Board clarified that interest shall be recoverable when credit has been wrongly taken, even if it has not been utilized, in terms of the wordings of Rule 14 of the CENVAT Rules.