circular no 897/17/2009

Yes, the circular is clear that as per the present situation interest has to be paid.

But do remember that if you reverse the credit before it comes to the knowledge of the department then you are not liable for interest. 

Assessee is not liable to pay interest in the case where credit was only taken and not utilized. Rule 14 of the CENVAT Credit Rules, 2004, is clear and unambiguous in the position that interest would be recoverable when CENVAT credit is taken or utilized wrongly.

Please send a copy of the circular No. 897/17/2009

Follow the link below for the circular:

https://www.cbec.gov.in/excise/cx-circulars/cx-circulars-09/897-2k9cx.pdf

The circular is a nice way of superceding Supreme Court Judgemnt.

As a common sense interest is payable only when government has lost something. Interest is always compensatory in nature and never punitive. When a person has merely taken the credit in books, and not utilised the credit, in no way government has suffered or assessee has benefitted. Therefore, there is no question of any compensatory payment in terms of payment.

The view was held in case of Maruti, approved by High Court and departmental SLP was dismissed in Supreme Court. Despite this such circular was issued. This circular will merely harass smaller assessee, and when the question will be raised in case of some big assessee, it will be quashed in higher judiciary. Till that time assessee will be harassed.

I sincerely feel that rule making power/circular issuing power must not be given in the hand of revenue officials. It should be there with an expert board, whose purpose is legal collection of taxes, and not merely revenue gathering. Unless that is done, assessees will suffer. 

I just examined the legality of the circular 897/17/2009:

https://www.articlesbase.com/law-articles/interest-on-irregular-cenvat-taken-or-utilized-1323762.html