Interest on wrongly availed Cenvat credit remains payable even after reversal before show cause notice.

Rule 12 of the Cenvat Credit Rules, 2002 fastens interest liability where Cenvat credit is taken or utilised wrongly, or is erroneously refunded, and applies sections 11A and 11AB of the Central Excise Act, 1944 mutatis mutandis. The Tribunal held that once excess credit is wrongly availed, interest follows under the rule even if the assessee reverses the credit before issuance of the show cause notice. Prior reversal does not extinguish the statutory liability to pay interest on the wrongly taken credit.

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Issues: Whether interest was payable on the excess Cenvat credit wrongly availed by the assessee, even though the credit amount had been reversed before issuance of the show cause notice.

Analysis: Rule 12 of the Cenvat Credit Rules, 2002 provides that where Cenvat credit has been taken or utilised wrongly, or has been erroneously refunded, the amount along with interest shall be recovered and the provisions of sections 11A and 11AB of the Central Excise Act, 1944 apply mutatis mutandis. The Tribunal held that the rule expressly fastens liability to pay interest on wrongly taken credit, and prior reversal of the amount before the show cause notice does not remove that liability.

Conclusion: Interest was payable on the wrongly availed excess Cenvat credit, and the assessee was not entitled to relief.

Ratio Decidendi: Where Cenvat credit is wrongly taken, liability to pay interest follows under Rule 12 of the Cenvat Credit Rules, 2002 notwithstanding subsequent reversal before notice.

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