Bharat Heavy Electricals Ltd. Vs Commissioner of Central Tax (CESTAT Hyderabad)
The appeal before the Income Tax Appellate Tribunal (ITAT), Hyderabad, arose from an order confirming demand of ₹58,66,606 on account of CENVAT credit availed on allegedly misappropriated nickel. The case originated from internal reports submitted by the appellant indicating misappropriation and non-accounting of nickel, including instances of clandestine removal and destruction of records. A committee constituted by the appellant quantified the shortage at 5411 kg out of imported nickel, and the corresponding credit of ₹21,15,313 was reversed voluntarily on 01.05.2010 and disclosed in statutory returns.
In earlier proceedings, the adjudicating authority accepted the committee’s findings and restricted the demand to the extent of 5411 kg. However, during remand proceedings, the authority expanded the demand by considering a higher quantity of 15944 kg and imposed interest and penalty.
The Tribunal examined whether the quantity of misappropriated nickel could be re-determined in remand. It held that since the earlier finding of 5411 kg was not challenged by the department, it attained finality and could not be altered. Accordingly, the demand was restricted to ₹21,15,313.
On the issue of interest, the Tribunal observed that the credit was reversed prior to its utilization and that sufficient balance existed during the relevant period. It held that where credit is reversed before use, it is treated as if no credit was taken, and therefore interest is not payable.
