Toyota Kirloskar Motors Pvt. Ltd. Vs Commissioner of Central Excise Large Taxpayer Unit (CESTAT Bangalore)
Material Facts
Toyota Kirloskar Motors Pvt. Ltd. (the appellant) manufactures Multi Utility Vehicles (MUV)/Passenger Cars and parts thereof falling under Chapter 87 of the Central Excise Tariff Act, 1985. During the period from April 2012 to March 2013, the appellant wrongly availed CENVAT Credit amounting to ₹1,21,22,026/- on duty paid for “Outdoor Catering Services.” Upon the issue being pointed out, the appellant debited the said amount.
Procedural History
A show-cause notice was issued on 01.05.2013 proposing to deny the wrongly availed credit, appropriate the amount already paid, and recover interest and penalty. The Commissioner of Central Excise and Service Tax, Bangalore, passed Order-in-Original No. BLR-LTUNT-000-COM-043-2014-15 dated 19.06.2014, confirming the demand, appropriating the paid amount with interest, and imposing an equivalent amount of penalty. The appellant filed the present appeal before CESTAT Bangalore challenging this adjudication order.
Legal Issues & Statutory Provisions
- Whether the appellant is liable to pay interest under Rule 14 of the Cenvat Credit Rules, 2004 on the inadmissible CENVAT Credit of ₹1,21,22,026/- availed on Outdoor Catering Services when the credit was not utilized.
- Whether equivalent penalty is imposable for wrong availing of CENVAT Credit on Outdoor Catering Services.
- Statutory provisions involved: Rule 2(l) and Rule 14 of the Cenvat Credit Rules, 2004; Sections 11A and 11AA of the Central Excise Act, 1985; Sections 73 and 75 of the Finance Act.
Parties’ Submissions
- Appellant’s Submissions: The advocate conceded the inadmissibility of CENVAT Credit on Outdoor Catering Services with effect from 01.04.2012 in view of prior rulings. However, it was submitted that penalty should be set aside as the issue involved legal interpretation. Regarding interest, the advocate argued that under Rule 14 of the Cenvat Credit Rules, 2004 as amended w.e.f. 01.04.2012, interest is leviable only if credit is both taken and utilized wrongly. The appellant had an unutilized CENVAT Credit balance of ₹47,97,91,888/- as of 31st March 2013, showing the availed credit was never utilized.
- Respondent’s Submissions: The Authorized Representative for the Revenue reiterated the findings of the Commissioner in the adjudication order.
Tribunal’s Observations, Findings & Final Decision
The Tribunal observed that the inadmissibility of CENVAT Credit on Outdoor Catering Services was undisputed under Rule 2(l) of the Cenvat Credit Rules, 2004 and established precedent.
Regarding penalty, the Tribunal noted that in the appellant’s own case for an earlier period, penalty was set aside because the issue related to the interpretation of law; hence, penalty was held not imposable.
Regarding interest, the Tribunal analyzed the amended Rule 14 of the Cenvat Credit Rules, 2004 (w.e.f. 01.04.2012), which provides that interest shall be recovered where CENVAT Credit has been “taken and utilised wrongly.” The plain reading of amended Rule 14 mandates that interest is payable only when inadmissible credit is both availed and wrongly utilized.
The Tribunal modified the impugned order:
Upheld the recovery of the inadmissible CENVAT Credit.
Set aside the penalty.
Remanded the matter to the Adjudicating Authority (Commissioner) for the limited purpose of verifying whether the credit was utilized at any point during the relevant period and computing interest, if any, accordingly.
The appeal was disposed of on these terms.
Cases Discussed
- Toyota Kirloskar Motor Pvt. Ltd. V. CCT (Karnataka High Court), [2021 (50) GSTL 286 (Kar.)]
- Toyota Kirloskar Motor Pvt. Ltd. V. CCT (Supreme Court), 2021 (55) GSTL 129 (SC)
FULL TEXT OF THE CESTAT BANGALORE ORDER
This is an appeal filed against Order-in-Original No. BLR-LTUNT-000-COM-043-2014-15 dated 19.06.2014 passed by the Commissioner of Central Excise and Service Tax, Bangalore.
2. Briefly stated the facts of the case are that the appellant is engaged in the manufacture of Multi Utility Vehicles (MUV)/Passenger Cars and parts thereof falling under chapter 87 of Central Excise Tariff Act, 1985. During the period April 2012 to March 2013, they have wrongly availed the cenvat credit amounting to Rs.1,21,22,026/- of the duty paid on ‘Outdoor Catering Services’ and on being pointed out to them, they debited the same. A show-cause notice was issued to them on 01.05.2013 denying the credit availed wrongly and the amount already paid proposed to be appropriated; interest and penalty proposed to be recovered. On adjudication, the demand was confirmed and the amount paid was appropriated with interest and also equivalent amount of penalty was imposed on them. Hence, the present appeal.
2.1 At the outset, the learned advocate for the appellant has submitted that in the present case, the appellant do not dispute inadmissibility of cenvat credit on “Outdoor Catering Services” w.e.f. 01.04.2012, being held inadmissible by this Tribunal vide Final Order No. 21681/2018 dated 29.10.2018 which has been later upheld by the Hon’ble Karnataka High Court reported as Toyota Kirloskar Motor Pvt. Ltd. V. CCT, [2021 (50) GSTL 286 (Kar.)] and affirmed by the Hon’ble Supreme Court reported as 2021 (55) GSTL 129 (SC). He has further submitted that in the Final Order, this Tribunal set aside the penalty imposed on them. Further, he has submitted that interest has been wrongly directed to be collected from the appellant as they have not utilized the credit amount availed during the period in question, since they had unutilized cenvat credit balance of Rs.47,97,91,888/- as on 31st March 2013. In view of the amendment to the Rule 14 of the Cenvat Credit Rules, 2004 w.e.f. 01.04.2012, interest will be liveable only if the cenvat credit has been taken and utilized wrongly by an assessee.
3. Learned Authorized Representative for the Revenue has reiterated the findings of the learned Commissioner.
4. Heard both sides and perused the records.
5. The short issue involved in the present appeal is whether the appellant is required to discharge interest on the inadmissibility cenvat credit of Rs.1,21,22,026/- availed by them on the service tax paid on “Outdoor Catering Service”. The appellant has not disputed the inadmissibility of cenvat credit of the service tax paid on Outdoor Catering Service. In view definition of input services under Rule 2(l) of the Cenvat Credit Rules and the judgment of the Hon’ble Karnataka High Court in their own case which later upheld by the Hon’ble Supreme Court, the appellant had disputed the imposition of penalty and levy of interest for availing inadmissibility credit in the said Outdoor Catering Services. We find that this Tribunal, in the appellant’s own case for earlier period, set aside the penalty observing that the issue relates to interpretation of law; hence penalty is not imposable.
6. On the issue of interest, we find that the law has been amended w.e.f. 01.04.2012. The amended Rule 14 of the Cenvat Credit Rules, 2004 reads as follows:
“RULE 14. Recovery of CENVAT credit wrongly taken or erroneously refunded.—Where the CENVAT credit has been taken and utilised wrongly or has been erroneously refunded, the same along with interest shall be recovered from the manufacturer or the provider of the output service and the provisions of sections 11A and 11AA of the Excise Act or sections 73 and 75 of the Finance Act, shall apply mutatis mutandis for effecting such recoveries.”
A plain reading of the proposed amendment reveals that interest should be payable only when the inadmissible cenvat credit availed and utilized wrongly. In the present case, the claim of the learned advocate for the appellant is that they have not utilized the credit even though availed, since, they have balance credit amount of Rs.47,97,91,888/- as on 31st March 2013. Thus, only for the limited purpose of verification of the utilization of the credit at any point of time during the relevant period, the matter is remanded to the Adjudicating Authority. The impugned order is modified by upholding the recovery of the inadmissible credit as held by the learned Commissioner; Penalty is set aside and for the limited purpose of computing interest if any, the matter is remanded to the learned Commissioner.
7. Appeal is disposed of accordingly on the above terms.
(Operative part of this Order was pronounced in Open Court on conclusion of the hearing.)
