100% CENVAT credit taken on capital goods in first year itself - assessee is required to pay interest on 50% of CENVAT credit availed in first year
IN this interesting case, the applicant had taken 100% of the CENVAT credit on the capital goods in the first year itself. That's blasphemous, one may say, taking the entire credit in one go when the rule allows one to take 50% in the first year and the balance of whatever is left in the subsequent years!
Now, suppose, an assessee commits this blasphemy, what should the department do?
Issue a demand notice seeking recovery of the extra 50% credit availed OR seek recovery of the entire amount of CENVAT credit availed and proposing imposition of equivalent penalty and interest.
The CCE, Pune-I officers opted for the second alternative and successful they were up to the level of the first appellate authority.
Before the CESTAT, the appellant submitted that that they are entitled for 50% of the CENVAT credit in the first year and remaining 50% in the subsequent year on the capital goods and the only question arises is interest on the 50% of the CENVAT credit taken in the first year.
The Bench observed - "Undisputedly, it is not a case of the department that they are not entitled for the CENVAT credit. However, the applicants had to pay interest on the 50% of the CENVAT credit availed on capital goods in the first year."