INTEREST LIABILITY IS TRIGGERED IF CENVAT CREDIT IS WRONGLY TAKEN THOUGH NOT UTILIZED

The Central Board of Excise and Customs has clarified that liability to interest would arise where CENVAT credit is wrongly taken but reversed by the taxpayer even before utilization. Rule 14 of the CENVAT Credit Rules, 2004 ('CENVAT Rules') provides for recovery of credit taken or utilized wrongly along with interest. In the case of CCE vs Maruti Udyog Limited [2007 (214) ELT 173 (P&H)], the High Court had held that the taxpayer is not liable to pay interest where credit was taken but not utilized. The Special Leave Petition ('SLP') against this order was dismissed by the Hon'ble Supreme Court.The Board observed that the High Court decision in Maruti Udyog Limited was delivered in the context of erstwhile Rule 57-I of the Central Excise Rules, 1944 ('Erstwhile Rules') and that the dismissal of the SLP by the Supreme Court was not a judgment. The Board clarified that interest shall be recoverable when credit has been wrongly taken, even if it has not been utilized, in terms of the wordings of Rule 14 of the CENVAT Rules.