Steel Authority of India Ltd. Vs Commissioner of GST & Central Excise (CESTAT Chennai)
The Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) in Chennai addressed an appeal by Steel Authority of India Ltd. (SAIL) against an order concerning the irregular availment of CENVAT credit. SAIL, a manufacturer of steel products, had inadvertently taken double credit and excess credit on certain invoices, totaling ₹5,37,442, during April 2010 to March 2011. Upon detection during a departmental audit, SAIL reversed the excess credit before a Show Cause Notice (SCN) was issued. Subsequently, an SCN was issued demanding recovery of the excess credit along with interest and a penalty. The original authority dropped the penalty, noting SAIL’s sufficient credit balance and its status as a public sector undertaking, suggesting no intent to evade duty but ordered the payment of interest. On appeal by the department, the Commissioner (Appeals) allowed the appeal and imposed a penalty of ₹2,68,721. This led SAIL to file an appeal before the CESTAT Chennai.
The counsel for SAIL argued that the imposition of penalty under Section 11AC requires evidence of fraud, willful misstatement, or suppression of fact, which the department failed to demonstrate. They further contended that interest was not payable as SAIL possessed sufficient credit balance, relying on a judgment by the Karnataka High Court in Commissioner of Central Excise & Service Tax, LTU, Bangalore v. Bill Forge Private Limited. This judgment established that interest is compensatory for delayed tax payment and is not applicable from the date of incorrect credit availment if the credit was not utilized due to sufficient balance. The CESTAT Chennai, after considering the facts and arguments, noted that while SAIL had breached CENVAT Credit Rules by irregularly availing credit, the excess credit was reversed before the SCN and was never utilized for duty payment due to the availability of sufficient credit. Citing the Bill Forge precedent and the fact that SAIL is a public sector unit with no demonstrated intent to evade duty, the CESTAT set aside both the demanded interest and the imposed penalty, modifying the Commissioner (Appeals)’ order and allowing SAIL’s appeal.
