Interest on wrong credit of CENVAT – another A-SATYAM
The CAG Report further states:
M/s Satyam Computers Services Ltd., in Hyderabad II Commissionerate, engaged in rendering of consulting engineers services, manpower recruitment agency services etc., took credit of Rs. 4.15 crore during the period between February 2006 and July 2007, of the service tax paid on health insurance services obtained from insurance companies for the welfare of their employees. The internal audit wing of the department objected to these wrong credits in August/October 2007 and in pursuance of these objections, the assessee reversed the entire credit on 31 August 2007. However, the interest payable on these incorrect credits from the date of taking credit to the date of reversal, amounting to Rs. 46.37 lakh, was neither paid by the assessee nor was it demanded by the department.
On this being pointed out (December 2007), the department stated (May 2008) that since the assessee did not utilise the excess availed amount, charging of interest on the credit lying unutilised was not warranted in view of a plethora of judicial decisions of Tribunals/High Courts.
The fact, however remains that under rule 14 of the Cenvat Credit Rules, 2004, it was statutorily required that where cenvat credit had been taken or utilised wrongly, the same along with interest was recoverable. The anomalous situation that had cropped up due to judicial pronouncements needs to be remedied by Government by making the relevant provisions more explicit and unambiguous, as otherwise the provisions of the said rule with regard to recovery of interest were not enforceable even though the assessees commit breach of cenvat provisions by taking wrong credits on ineligible services.
Audit recommends that Government should amend the Rules, in view of past judicial pronouncements, to bring the provisions of the rules, consistent with these.