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Issues: Whether interest on wrongly availed Modvat credit became payable from the date of the retrospective amendment or only after the writ petition challenging the amendment was dismissed.
Analysis: The liability to reverse the credit was linked to the legal position becoming final after the challenge to the amendment failed. The retrospective amendment to Rule 57B, read with Section 112 of the Finance Act, 2000, could not by itself make interest recoverable from the earlier date when the amendment was under challenge and interim protection had been granted. Interest could arise only after the assessee's challenge was rejected and the demand crystallised, namely after one month from dismissal of the writ petition.
Conclusion: Interest was not payable from the date of the retrospective amendment. The assessee was liable to pay interest only after one month from the date of dismissal of the writ petition until payment, which is in favour of the assessee on the disputed period.
Final Conclusion: The demand was confined to the period after the writ challenge failed, and the order was modified accordingly.
Ratio Decidendi: Where the validity of a retrospective amendment is under judicial challenge and the assessee is protected by interim stay, interest on the reversed credit accrues only when the challenge fails and the liability crystallises, not from the date of the amendment itself.
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