February 01, 2026 : The Bangalore Bench of the Customs, Excise and Service Tax Appellate Tribunal has ruled that where Cenvat credit is availed and reversed on the very same day, such action amounts to no availment in the eyes of law. Consequently, no interest or penalty can be sustained.

The ruling came in Central Excise Appeal No. 27571 of 2013, filed by BPL Techno Vision Pvt. Ltd. against the Commissioner of Central Excise, Bangalore-I Commissionerate. The Bench comprising Dr. D.M. Misra (Judicial Member) and Pullela Nageswara Rao (Technical Member) set aside the demand of interest and penalty while upholding the reversal already made by the assessee.

The appellant is engaged in the manufacture of rechargeable lanterns, speakers, digital satellite receivers, and solar lanterns falling under Chapters 85 and 94 of the Central Excise Tariff Act, 1985. While most of its products were dutiable, solar lanterns were exempted goods, the manufacture of which commenced only in December 2009. The assessee had been availing Cenvat credit on inputs and input services used in the manufacture of its final products.

During an audit covering the period from August 2009 to March 2011, the Department alleged that the assessee had availed Cenvat credit of ₹27.37 lakh on various input services including security services, management consultancy, repair and maintenance, tours and travel, courier, import freight, customs house agent services, and manpower recruitment services. According to the Department, these services were common to both dutiable and exempted goods, and since separate accounts were not maintained as required under Rule 6(2) of the Cenvat Credit Rules, 2004, the assessee was liable to pay 5 percent of the value of exempted goods, amounting to ₹55.70 lakh, along with interest and penalty.

A show cause notice dated 14 June 2012 was issued, and the demand was confirmed by the Commissioner of Central Excise.

Before the Tribunal, the appellant argued that no exempted goods were manufactured prior to December 2009 and therefore credit availed before that period could not be treated as common credit. It was further contended that during the disputed period, no Cenvat credit was availed on common input services used for exempted goods. The appellant submitted that only after the audit objection was raised did it avail proportionate credit on common inputs and input services, and on the very same day, 06 February 2012, it reversed 5 percent of the value of exempted goods amounting to ₹55.70 lakh. The reversal was made through two entries on the same date, acknowledged in the show cause notice, and appropriated in the adjudication order.

Relying on binding precedents of the Karnataka High Court, the appellant contended that when credit is availed and reversed on the same day, it amounts to no wrongful availment, and therefore no interest or penalty can be imposed. It was also argued that the proceedings were barred by limitation.

The Revenue defended the impugned order and reiterated the findings of the Commissioner.

After examining the records, the Tribunal found that the disputed amount of ₹55.70 lakh had admittedly been reversed by the assessee on the same day on which the proportionate credit was availed. No contrary evidence was produced by the Department to dispute the same. On the contrary, the amount reversed had been appropriated in the adjudication order itself.

In these circumstances, the Tribunal held that when credit is availed and reversed simultaneously, it amounts to no availment in law. Accordingly, the confirmation of interest and imposition of penalty were held to be legally unsustainable. The appeal was allowed with consequential relief, while the reversal already made by the assessee was upheld.