By Puloma Dalal, Jayesh Gogri, Chartered Accountants
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CENVAT credit taken wrongly and utilised later attracts interest from the date of availment and not from the date of utilisation – Rule 14 of CENVAT Credit Rules being unambiguous does not require to be read down.
Facts:
The company manufacturing bulk drugs availed CENVAT credit based on invoices for inputs and capital goods issued allegedly without accompanying material. After receiving show cause notice and replying to the same, the company filed application for settlement of proceedings and deposited entire duty of Rs.5.71 crores. The Settlement Commission found that wrongful CENVAT credit was taken from the year 2001 to 31/03/2006 whereas the payments were made in February 2006 and on various dates in March 2006 and in November 2006. The Commission ordered the assessee to pay interest from the date of availment of credit till the date of payment. The company disputed calculation of interest from the date of availment instead of the date of utilisation. The Commission considered the final order as conclusive and rejected its application. The company did not pay interest in terms of the final order. Therefore the balance amount was called for by the authorities. Against the said demand, a writ in the P&H High Court was filed. Allowing it, the High Court held that mere availment of credit does not create any liability of payment of duty and further held that on a conjoint reading of section 11AB of the Tariff Act and that of Rules 3 and 4 of the Credit Rules, interest cannot be claimed from the date of wrong availment of CENVAT credit and it would be payable only from the date the CENVAT credit was wrongly utilised. The interference of the High court was challenged by the authorities.
The Supreme Court examined Rule 14 of the CENVAT Credit Rules dealing with interest to consider the finding recorded by the High Court by way of reading down the provision of Rule 14 as the issue before the Court was to decide whether the interest was leviable from the date of availment of credit or the date of utilisation.
Held:
Rule14 specifically provides for recovery of interest where CENVAT credit is taken or utilised wrongly by the manufacturer or the service provider or refunded erroneously to either of them. The High Court misunderstood this provision and wrongly read it down as statutory provision is generally read down only when the same is capable of being declared unconstitutional or illegal. No harmonious construction is required to be given to the aforesaid provision, which is unambiguous and exists all by itself. It is not permissible to import provisions in a taxing statute so as to supply any assumed deficiency. The order of the Settlement Commission thus was restored.
