Wrongly availed Cenvat credit attracts interest, but penalty may be set aside where the dispute was bona fide.

Interest was payable on wrongly availed Cenvat credit, and the assessee's subsequent reversal after objection did not extinguish that liability; the interest component was therefore upheld. Penalty was not justified where credit on education cess paid on customs duty was taken under a bona fide interpretational dispute rather than deliberate wrongdoing; the penalty was therefore set aside. The order thus survived only to the extent of interest, while the penal consequence was annulled.

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Issues: (i) Whether interest was payable on wrongly availed Cenvat credit; (ii) Whether penalty was warranted for availing credit on education cess paid on customs duty.

Issue (i): Whether interest was payable on wrongly availed Cenvat credit.

Analysis: The appellant had availed Cenvat credit on education cess paid on customs duty and later reversed the credit after the objection was raised. The liability to pay interest on wrongly availed credit was held to survive.

Conclusion: Interest confirmed in the impugned order was upheld against the assessee.

Issue (ii): Whether penalty was warranted for availing credit on education cess paid on customs duty.

Analysis: The availment of credit involved a disputed issue during the relevant period and was treated as a misinterpretation of entitlement rather than a case warranting penal consequences.

Conclusion: The penalty was set aside in favour of the assessee.

Final Conclusion: The order was sustained to the extent it fastened interest liability, but the penalty component was annulled.

Ratio Decidendi: Interest is payable on wrongly availed credit, but penalty is not justified where the availment arose from a bona fide interpretational dispute.

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