Background
The issue whether interest is leviable at the point of time when the CENVAT Credit is wrongly taken or at the point of utilisation has been a matter of extensive judicial considerations. Further, an important amendment was made in Rule 14 of the CENVAT Rules through Notification dated 17-03-2012. This subject was discussed in the June 2012 issue of the BCAJ in the backdrop of an important ruling of the Karnataka High Court. However, subsequent to the said ruling, divergent views have been expressed by different judicial authorities (in particular recent ruling of CESTAT – Mumbai). Hence, since the issue has become highly controversial, the same is being discussed hereafter in the backdrop of divergent judicial rulings.
Relevant Statutory Provisions
• Rule 14 of CENVAT Credit Rules, 2004 (“CCR”)
” Where the CENVAT Credit has been taken or utilised wrongly or has been erroneously refunded, the same along with the interest shall be recovered from the manufacturer or provider of the output service and the provisions of the sections 11A and 11AB of the Excise Act, or sections 73 and 75 of the Finance Act, shall apply mutatis mutandis for effecting such recoveries.”
[Note – The words “taken or utilised wrongly” have been substituted by the words “taken and utilised wrongly vide Notification No. 18/2012 – CE(NT) dated 17-03-12]
• Rule 4(1) of CCR
“The CENVAT credit in respect of inputs may be taken immediately on receipt of the inputs in factory of the manufacturer or premises of provider of output service………..”
• Rule 4(2) (a) of CCR
“The CENVAT Credit in respect of capital goods …….. at any point of time in a given financial year shall be taken only for an amount not exceeding 50 % of duty paid on such capital goods in the same financial year.“
• Rule 4(7) of CCR
“The CENVAT Credit in respect of input service shall be allowed, on or after the day on which payment is made of the value of input service and service tax paid or payable as indicated in Invoice…………”
Analysis of Credit ‘wrongly’ ‘taken’ / ‘utilised’
To understand the difference (if any) between the terms ‘wrongly’ ‘taken’ and ‘utilised’, the meanings attributed to these words used in Rule 14 of CCR is given hereafter for ready reference :
• ‘Taken’ means “to gain or receive into possession, to seize, to assume ownership” (Black’s Law Dictionary).
• ‘To take’, signifies “to lay hold of, grab, or seize it, to assume ownership etc.” (Advance Law Lexicon – 3rd Edition).
• ‘Utilise’ means “to make practical and effective use of” (Compact Oxford Dictionary Thesaurus).
• ‘Utilise’ means “to make use of, turn to use” (The Chambers Dictionary).
• ‘Wrongful’ – “characterised by unfairness of injustice, contrary to law” (Concise Oxford Dictionary)
• ‘Wrong’ – “any damage or injury, contrary to right, violation of right or of law” (P. Ramanatha Aiyer’s Law Lexicon)
Reversal of CENVAT Credit before Utilization – Settled Position
• In a landmark ruling in Chandrapur Magnet Wires (P) Ltd. vs. CCE (1996) 81 ELT 3 (SC), it has been held by the Supreme Court that, when the MODVAT Credit taken is reversed, it would mean that the MODVAT Credit has not been taken at all. This principle is relevant for the CENVAT Credit as well. Relevant observations of the Supreme Court are reproduced hereafter :
Para 7
In view of the aforesaid clarification by the department, we see no reason why the assessee cannot make a debit entry in the credit account before removal of the exempted final product. If this debit entry is permissible to be made, credit entry for the duties paid on the inputs utilised in manufacture of the final exempted product will stand deleted in the accounts of the assessee. In such a situation, it cannot be said that the assessee has taken credit for the duty paid on the inputs utilised in the manufacture of the final exempted product under Rule 57A. In other words, the claim for exemption of duty on the disputed goods cannot be denied on the plea that the assessee has taken credit of the duty paid on the inputs used in the manufacture of these goods.
The above stated principle laid down by the Supreme Court has been followed in a large number of cases. [For e.g. CCE vs. Ashima Dyecot Ltd. (2008) 232 ELT 580 (GUJ)].
Similarly, the said principle was also asserted by the Hon. Supreme Court in CCE, Mumbai vs. Bombay Dyeing & Mfg. Co. Ltd. 2007 (215) ELT 3 (SC) wherein it was held “whenever duty is paid on the input, the assessee is entitled to credit under CENVAT Credit Rules, 2002 however availment of credit takes place later on when the assessee makes adjustments of duty paid on input against duty paid on final product. In the present case, before the account could be debited and before the assessee could avail CENVAT Credit, assessee has reversed CENVAT Credit which would amount to the assessee not taking credit for duty paid on input. Learned counsel submitted that the assessee was free to reverse the credit before utilization of such credit.” This decision was also accepted by the Gujarat High Court in CCE vs. Dynaflex Ltd. 2011 (266) ELT 41 (Guj).
Department clarification
The CBEC had vide Circular No. 897/17/2009 – CX, dated 03-09-2009 has clarified as under:
“The Tribunal decision and the High Court judgment referred to above, was delivered in the context of erstwhile Rule 57 I of the Central Excise Rules, 1944 and that the Supreme Court order under reference is only a decision and not a judgment. 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 utilised wrongly, it is clarified that the interest shall be recoverable when credit has been wrongly taken, even, if it has not been utilised, in terms of wordings of the present Rule 14.”
It may be noted that erstwhile Rule 57 I of the Central Excise Rules, 1944 did not specifically provide for any interest payment along with reversal of wrongly taken credit while present Rule 14 of CCR provides for payment of interest along with the reversal of wrongly taken credit.
Interest on Credit taken but not utilized – Judicial Views
• In CCE vs. Maruti Udyog Ltd. (2007) 214 ELT 173 (P & H)], the Hon’ble Punjab & Haryana Court agreed with the views of the Hon’ble CESTAT that the assessee was not liable to pay interest as the credit was only taken as entry in the MODVAT record and was in fact not utilised. The SLP filed by the revenue against this order of the Hon’ble Punjab & Haryana High Court was dismissed by the Hon’ble Supreme Court (2007) 214 ELT A 50 (SC) on 10-10-2006.
In the case of Maruti Udyog, the assessee claimed the Modvat credit which was not allowable in the absence of the requisite certificate under Rule 57E of the Central Excise Rules, 1944 being produced within six months but still the assessee claimed the same and credited the amount in RG – 23A Part II. The authorities disallowed the Modvat credit relying upon judgment of the Hon’ble Supreme Court in Osram Surya (P) Limited vs. Commissioner of Central Excise, Indore (2002) 142 ELT 5 (SC).
The Tribunal, however, had held that the assessee was not liable to pay interest as the credit was only taken as an entry in the Modvat record and was not in fact utilised. The Tribunal held that in absence of utilisation of credit, the assessee was not liable to pay interest.
The P & H High Court held as under :
“Learned Counsel for the appellant is unable to show as to how the interest will be required to be paid when in absence of availment of Modvat Credit in fact, the assessee was not liable to pay any duty. The Tribunal has clearly recorded a finding that the assessee did not avail of the Modvat Credit in fact and had only made an entry.
In view of this factual position, we are unable to hold that any substantial question of law arises”.
• Attention is particularly drawn to the ruling of the Punjab & Haryana High Court in the case of Ind – Swift Laboratories Ltd. vs. UOI (2009) 240 ELT 328 (P & H), relevant extracts from which, are reproduced hereafter for reference:
Para 9
• The Scheme of the Act and the CENVAT Credit Rules framed thereunder permit a manufacturer or producer of the final products or a provider of taxable service to take the CENVAT Credit in respect of duty of excise and such other duties as specified. The conditions for allowing the CENVAT Credit are contained in Rule 4 of the Credit Rules contemplating that the CENVAT Credit can be taken immediately on receipt of the inputs in the factory of the manufacturer or in the premises of the provider of output service. Such CENVAT Credit can be utilised in terms of Rule 3(4) of Credit Rules for payment of any duty of excise on any final product and as contemplated in the aforesaid sub-rule. It, thus, transpires that the CENVAT credit is the benefit of duties leviable or paid as specified in Rule 3(1) used in the manufacture of intermedi- ate products etc. In other words, it is a credit of the duties already leviable or paid. Such credit in respect of duties already paid can be adjusted for payment of duties payable under the Act and the Rules framed thereunder. U/s. 11AB of the Act, liability to pay interest arises in respect of any duty of excise has not been levied or paid or has been short levied or short paid or erroneously refunded from the first day of the month in which the duty ought to have been paid. Interest is leviable if duty of excise has not been levied or paid. Interest can be claimed or levied for the reason that there is delay in the payment of duties. The interest is compensatory in nature as the penalty is charge- able separately.
Para 10
• In Pratibha Processors vs. Union of India, 1996
(88) ELT 12 (SC) = (1996) 11 SCC 101, it was held that interest is compensatory in character and is imposed on an assessee who has withheld payment of any tax as and when it is due and payable. Similarly, in Commissioner of Customs vs. Jayathi Krishna & Co. – 2000 (119) ELT 4(SC) (2000) 9 SCC 402, it was held that interest on warehoused goods is merely an accessory to the principal and if the principal is not payable, so is it for interest on it. In view of the aforesaid principle, we are of the opinion that no liability of payment of any excise duty arises when the petitioner availed the CENVAT Credit. The liability to pay duty arises only at the time of utilisation. Even if the CENVAT Credit has been wrongly taken, that does not lead to the levy of interest as a liability of payment of excise duty does not arise with such availment of the CENVAT Credit by an assessee. Therefore, interest is not payable on the amount of the CENVAT credit availed of and not utilised.
Para 11
• Reliance of respondents on Rule 14 of the Credit Rules that interest u/s. 11AB of the Act is payable even if the CENVAT Credit has been taken. In our view, the said Clause has to be read down to mean that where the CENVAT Credit taken and utilised wrongly. Interest cannot be claimed simply for the reason that the CENVAT credit has been wrongly taken as such availment by itself does not create any liability of payment of excise duty. On a conjoint reading of section 11AB of the Act and that of Rules 3 and 4 of the Credit Rules, we hold that interest cannot be claimed from the date of wrong availment of the CENVAT Credit. The interest shall be pay- able from the date the CENVAT Credit is wrongly utilised.
• In an important ruling the Supreme Court, in the case of Ind-Swift Laboratories Ltd. (2011) 265 ELT 3 (S.C.)], set aside the order passed by the Punjab & Haryana High Court (2009) 240 ELT 328 (P & H)] on the question of charging interest on the CENVAT Credit wrongly taken, but not utilised. By interpreting the expressions and words used in the provisions of Rule 14 of CCR, the Supreme Court concluded that interest is payable on the CENVAT Credit wrongly taken even if such Credit has not been utilised.
The issue for consideration is whether an assessee can be made liable to pay interest for taking wrong credit if such credit has not been utilised inasmuch he has not derived any benefit out of his wrong action.
The more important observations of the Supreme Court are reproduced hereafter for ready reference:
“17. Xxxxxxxxxx In our considered opinion, the High Court misread and misinterprets the aforesaid Rule 14 and wrongly read it down without properly appreciating the scope and limitation thereof. A statutory provision is generally read down in order to save the said provision from being declared un- constitutional or illegal. Rule 14 specifically provides that where the CENVAT Credit has been taken or utilised would be recovered from the manufacturer or the provider of the output service. The issue is as to whether the aforesaid word “OR” appear- ing in Rule 14, twice, could be read as “AND” by way of reading it down as has been done by the High Court. If the aforesaid provision is read as a whole we find no reason to read the word “OR” in between the expression ‘taken’ or ‘utilised wrongly’ or has been erroneously refunded’ as the word “AND”. On the happening of any of the three aforesaid circumstances such credit becomes recoverable along with interest.
18. We do not feel that any other harmonious con- struction is required to be given to the aforesaid expression/provision which is clear and unambigu- ous as it exists all by itself. So far as section 11AB is concerned, the same becomes relevant and ap- plicable for the purpose of making recovery of the amount due and payable. Therefore, the High Court erroneously held that interest cannot be claimed from the date of wrong availment of the CENVAT Credit and that it should only be payable from the date when the CENVAT Credit is wrongly utilised. Besides, the rule of reading down is in itself a Rule of harmonious construction in a different name. It is generally utilised to straighten the crudities or ironing out the creases to make a statue workable. This court has repeatedly laid down that in the garb of reading down a provision it is not open to read words and expressions not found in the provision statute and thus venture into a kind of judicial legislation. It is also held by this Court that the Rule of reading down is to be used for the limited purpose of making a particular provision workable and to bring it in harmony with other provisions of the statute.
The interpretation made by the Honorable Supreme Court considering the specific circumstances of a case involving evasion of duty, has been a matter of extensive deliberation by the experts and rightly so inasmuch as, if the same is applied generally, it would mean unsettling the settled law.
• Important judgment of Karnataka High Court in CCE & ST vs. Bill Forge Pvt. Ltd. (2012) 26 STR 204 (KAR) [Bill Forge Case]
? However, observations of the Karnataka High Court in the Bill Forge case are very impor- tant, inasmuch not only has it distinguished facts of the case of UOI vs. Ind-Swift Labo- ratories Ltd. (2011) 265 ELT 3 (SC) but it has made a fine distinction between making an entry in the register and credit being ‘taken’ to drive home the point that interest is pay- able only from the date when duty is legally payable to the Government and the Govern- ment would sustain loss to that extent.
? In the Bill Forge case, the High Court referring to the Apex Court’s judgment in case of UOI vs. Ind-Swift Laboratories Ltd. observed as under:
Para 18
“In fact, in the case before the Apex Court, the assessee received inputs and capital goods from various manufacturers/dealers and availed the CENVAT Credit on the duty paid on such materi- als. The investigations conducted indicated that the assessee had taken the CENVAT Credit on fake invoices. When proceedings were initiated, the assessee filed applications for settlement of proceedings and the entire matter was placed before the Settlement Commission. The Settlement Commission held that a sum of Rs. 5,71,47,148.00 is the duty payable and simple interest at 10% on the CENVAT Credit wrongly availed from the date the duty became payable as per section 11AB of the Act till the date of payment. The Revenue calculated the said interest upto the date of the appropriation of the deposited amount and not upto the date of payment. Therefore, it was contended that inter- est has to be calculated from the date of actual utilisation and not from the date of availment. Therefore, an application was filed for clarification by the assessee. The said application was rejected upholding the earlier order, i.e. interest is payable from the date of duty becoming payable as per section 11AB. Therefore, the Apex Court interfered with the judgment of the Punjab and Haryana High Court and rightly rejected by the Settlement Com- mission as outside the scope and they found fault with the interpretation placed on Rule 14.”
“It is also to be noticed that in the aforesaid Rule, the word ‘avail’ is not used. The words used are ‘taken’ or “utilised wrongly”. Further the said provision makes it clear that the interest shall be recovered in terms of section 11A and 11B of the Act………”
Para 20
From the aforesaid discussion what emerges is that the credit of excise duty in the register maintained for the said purpose is only a book entry. It might be utilised later for payment of excise duty on the excisable product……… Before utilisation of such credit, the entry has been reversed, it amounts to not taking credit.”
para 22
“Therefore interest is payable from that date though in fact by such entry the Revenue is not put to any loss at all. When once the wrong entry was pointed out, being convinced, the assessee has promptly reversed the entry. In other words, he did not take the advantage of wrong entry. He did not take the CENVAT Credit or utilised the CENVAT credit. It is in those circumstances that the Tribunal was justified in holding that, when the assessee has not taken the benefit of the CENVAT Credit, there is no liability to pay interest. Before it can be taken, it had been reversed. In other words, once the entry was reversed, it is as if that the CENVAT credit was not available. Therefore, the said judgment of the Apex Court* has no application to the facts of this case It is only when the assessee had taken the credit, in other words by taking such credit, if he had not paid the duty which is legally due to the Government, the Government would have sustained loss to that extent. Then the liability to pay interest from the date the amount became due arises u/s. 11AB, in order to compensate the Government which was deprived of the duty on the date it became due.”
• The ruling of Karnataka High Court in Bill Forge case, has been followed in large number of subsequent decided cases For e.g.:
? CCE vs. Pearl Insulation Ltd. (2012) 27 STR 337 (KAR)
? CCE vs. Gokuldas Images (P) Ltd. (2012) 28 STR 214 (KAR)
? Sharvathy Conductors Pvt. Ltd. vs. CCE (2013) 31 STR 47 (Tri – Bang)
? CCE vs. Sharda Enargy & Minerals Ltd. (2013) 291 ELT 404 (Tri – Del)
? Gary Pharmaceuticals (P) Ltd vs. CCE (2013) 297 ELT 391 (Tri – Del)
? CCE vs. Balrampur Chinni Mills Ltd. (2014) 300 ELT 449 (Tri – Del)
However, in many cases, [For e.g., CCE vs. Kay Bouvei Engineering Pvt. Ltd. (2014) 301 ELT 100 (Tri – Mum- bai)], the Bill Forge case has not been followed and instead, the position held by the Supreme Court in Ind Swift case followed.
Important amendment in Rule 14 of CCR
In a very significant amendment in Rule 14 of CCR, with effect from 17-03-2012, the words CENVAT Credit has been “taken or utilised wrongly” has been substituted by the words “taken and utilised wrongly”.
This amendment strongly reinforces the interpreta- tion placed by the Punjab & Haryana High Court in Maruti Udyog & Ind Swift Laboratories and Karnataka High Court in the Bill Forge case to the effect that, no interest can be recovered in cases where the CENVAT Credit has been wrongly taken but not utilised by an assessee.
Recent Tribunal Ruling in Balmer Lawrie & Co. Ltd vs. CCE (2014) 301 ELT 573 (Tri – Mumbai)
This ruling is very important inasmuch as, it not only distinguishes the Karnataka High Court ruling in the Bill Forge case, but it also discusses the applicability of the amendment in Rule 14 of CCR vide Notification dated 17-03-2012.
In this case, the appellant is a manufacturer of lubricating oil availing the Cenvat Credit on various inputs and capital goods as provided for under (CCR). They availed the Cenvat Credit amounting to Rs. 1,61,04,675/- of the CVD paid on imported base oil. The base oil so obtained on which credit was taken, was returned by the appellant to M/s. VCL and M/s. Ultraplus Lube Pvt. Ltd. and the ap- pellant paid excise duty equivalent to the credit taken on such base oil returned. The department was of the view that the taking of credit by the appellant was not permitted under law inasmuch as the goods were not intended for use in the manufacture of excisable goods and, therefore, credit was not admissible under CCR ab initio. Ac- cordingly, a show cause notice dated 02-06-2008 was issued to the appellant proposing to recover the credit taken along with interest thereon under the provisions of Rule 14 of the CCR read with Sec- tion 11A(1) and section 11AB of the Central Excise Act, 1944. It was also proposed to impose penalty on the appellant under Rule 15 of the said Rules read with section 11AC of the said Central Excise Act. The said notice was adjudicated and duty de- mand was confirmed by denying the Central Excise credit of Rs. 1,61,04,675/- and interest on the said credit wrongly taken was also confirmed. A penalty of equivalent amount was also imposed on the ap- pellant under Rule 15 of Cenvat Credit Rules, 2004 read with section 11AC of the said Act. In addition, a fine of Rs. 1 crore was imposed on the goods i.e., base oil on the grounds that the same was liable to confiscation and hence, fine is imposable u/s. 34 of the Central Excise Act, 1944.
The Learned Counsel for the appellant submitted that inasmuch as the appellant had reversed the credit taken at the time of clearance of the base oil to M/s. VCL and Ultraplus Lube Pvt. Ltd., the question of reversal of credit once again does not arise and, therefore, the demand is not sustainable. It was further pointed out that the appellant had reflected the taking of the Cenvat Credit on base oil received from VCL in their monthly ER-1 returns and, therefore, the department was aware of the fact of taking of Cenvat credit by the appellant and hence no suppression of facts on the part of the appellant could be alleged. It is also argued that the said credit was available in the books of accounts of the appellant during the entire period and the appellant had never utilised the credit. Therefore, the question of liability to pay any interest thereon would not arise at all. Reliance was placed on the decisions of the Hon’ble Karnataka High Court in the case of CCE & S.T. vs. Bill Forge Pvt. Ltd. (2012) 26 STR 204 (KAR); CCE vs. Gokaldas Images (P) Ltd. (2012) 28 STR 214 (KAR); & CCE vs. Pearl Insulation Ltd. (2012) 27 STR 337 (KAR.) and the decisions of the Hon’ble High Court of Allahabad in the case of CC & Central Excise, Meerut vs. Rana Sugar Ltd. (2010) 253 ELT 366 (ALL). The Learned Counsel has further contended that Rule 14 of the Cenvat Credit Rules, 2004, was amended vide a Notification No. 18/2012-C.E. (N.T.), dated 17-03-2012 WHEReby the phrase “Cenvat credit has been taken or utilised wrongly” was substituted by the words “Cenvat credit has been taken and utilized wrongly”. Since the words have been substituted, the substitution will have retrospective effect and, therefore, unless the appellant utilises the credit, the question of recovery of Cenvat credit or interest thereon would not arise. Reliance was placed on the decisions of Supreme Court in Indian Tobacco Association (2005) 187 ELT 162 (SC) and W.P.I.L. Ltd. vs. CCE (2005) 181 ELT 359 (SC) in support of this proposition.
The Honorable Tribunal held as under: Para 5.2
The next issue for consideration is whether the appellant is liable to pay any interest on the credit taken. During the period involved, Rule 14 of the Cenvat Credit Rules, 2004 provided for the recovery of interest on the Cenvat Credit taken or utilised wrongly under the provisions of the said Rule read with section 11AB of the Central Excise Act, 1944. The issue also came up for consideration before the Hon’ble Apex Court in the case of Union of India vs. Ind – Swift Laboratories Ltd. (2011) 265 ELT 3 (SC) (2012) 25 STR 184 (SC). The question before the Honorable Apex Court was “when interest on irregular credit arises, is it from the date of availing of such credit or from the date of utilisation?” The Hon’ble Apex Court held that Rule 14 of the Cenvat Credit Rules, 2004 specifically provides for interest on the Cenvat Credit taken or utilised wrongly or erroneously refunded. Therefore, interest on irregu- lar credit arises from the date of taking of such credit. Accordingly it was held that if the Cenvat Credit taken is irregularly, though not utilised, the liability to pay interest would arise from the date of taking of the credit till the date of reversal of the credit. In view of the above decision by the Hon’ble Apex Court, the ratio of which is applicable to the present case, it becomes evident that the appellant is liable to discharge interest liability on the Cenvat Credit wrongly taken from the date of taking of the Cenvat credit till the date of reversal. The reliance placed by the appellant on the deci- sion of the Hon’ble Karnataka High Court in the case of Bill Forge Pvt. Ltd. (supra) and the other decisions will not apply to the facts of the present case. In the case of Bill Forge Pvt. Ltd. (supra) the appellant therein took the credit and also reversed the credit within the same month, i.e., before any liability to pay any duty arose. It was in that con- text the Hon’ble High Court held that if a credit has been taken but reversed before any liability to pay duty arose then no interest liability would accrue. Those are not the facts obtaining in the present case. It is not the case of the appellant that between the date of taking the credit and the date of reversal when the base oil was cleared, liability to pay duty did not arise at all. In fact the clearance has been spread over several months and years. Therefore, the facts of the case before us are clearly distinguishable from the facts involved in Bill Forge Pvt. Ltd. cited (supra) and hence ratio of the said decision would not apply. Since Pearl Insulation Ltd. (supra) and Gokaldas Images (P) Ltd. (supra) also follow the ratio of the Bill Forge Pvt. Ltd they would also not apply to the facts of the present case. As regards the reliance placed in the case of Rana Sugar Ltd. (supra), it is true that the Hon’ble Allahabad High Court had held that if the reversal of credit has been done before its utilisa- tion, demand of interest would not arise. However, the said order was passed much before the decision in Ind-Swift Laboratories Ltd. (supra) by the Hon’ble Apex Court was pronounced. Therefore, the ratio of Ind-Swift Laboratories Ltd. would prevail over all the other decisions of various Courts.
Para 5
As regard the argument advanced by the appellant that since the expression “Cenvat Credit taken or utilised wrongly” had been substituted effective from 17-03-2012 WITH the words “Cenvat Credit taken and utilised wrongly”, the same would have retrospective effect and, therefore, inasmuch as the appellant has not utilised the credit there will not be any liability to interest, this argument is misplaced. Rule 14 of the the Cenvat Credit Rules, 2004 was amended by a Notification No. 18/2012-C.E. (N.T.), dated 17-O3-2012 and amendment effected in Rule 14 of the Cenvat Credit Rules, 2004 read follows:-
“In Rule 14 of the said Rules, with effect from the 17th day of March, 2012,-
a) For the words “taken or utilised wrongly”, the words “taken and utilised wrongly” shall be substituted;
This amendment rule makes it absolute clear that the amendment is with effect from 17-O3-2012 (in- advertently mentioned as 17-03-2004 in the ruling) and not before. In view of the express provisions in the Amendment Rules, the argument of the appellant that amendment being in the nature of substitution would have retrospective effect cannot be accepted. It is a trite law that every statutory provision is prospective only unless it is explicitly provided that it is retrospective in nature and the legislature provides for such retrospective operation. In the present case, no such retrospective view has been provided by the legislature in respect of Notification 18/2012 –C.E. (N.T.), dated 17-03-2012 and, therefore, the argument of the Counsel in this regard and the decisions relied upon in support of the same cannot be accepted.
It appears that, the factual position that appellants claimed credit to which they were not entitled at all, could have had a bearing on the conclusion arrived at by the Tribunal.
Conclusion
The Honorable Supreme Court in the Ind – Swift case has unsettled the judicially settled principle under the MODVAT (relevant for CENVAT Credit) that no interest is payable in cases where MODVAT Credit is wrongly taken but not utilised. Possibly, the specific circumstances of the case involving evasion of duty, had a bearing on the conclusion arrived at by the Apex Court.
It would appear that, it was correctly observed by the Honorable Punjab & Haryana High Court in Ind – Swift case that, interest is compensatory in character and is imposed on nonpayment/delayed payable. No liability of payment of any excise duty arises when the CENVAT Credit is availed. The li- ability to pay duty arises only at the time of utilisa- tion. Even if the CENVAT Credit is wrongly taken, that does not lead to levy of interest as liability of payment of excise duty does not arise with such availment of the CENVAT Credit by an assessee. Availment and utilisation of credit cannot be placed at equal footing for the purpose of charging inter- est. Availment of credit is only a book entry and does not result in any gain for the tax payer. The use of the credit results into benefit and that is the time which is relevant for charging interest.
With due respect, the judgment of the Honorable Supreme Court in the Ind – Swift case which has generated extensive judicial controversy, needs a serious reconsideration more particularly to advance the cause of the CENVAT Credit Scheme which is essentially a beneficial piece of legislation. Pending judicial resolvement of the controversy, Government could consider a clarificatory amendment to the effect that the amendment in Rule 14 of CCR vide Notification No 18/ 2012 – CE (NT) dated 17-03-2012 would have retrospective operation.
