Cenvat credit and delayed duty payment: interest held refundable when short payment was later regularised.

Interest paid on delayed discharge of duty was treated as refundable where the underlying duty could have been met by utilising available Cenvat credit and the short payment was later made good. The Cenvat Credit Rules were read as barring only use of credit earned in a subsequent month for an earlier month's duty, not as prohibiting credit from being used to regularise a short-paid or unpaid amount once the default was noticed. As the duty for August clearances was paid in September within a few days, payment from PLA was not necessary. The refund claim was therefore allowable because the interest was not legally exigible.

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Issues: Whether interest paid on delayed discharge of duty was refundable when the duty could have been paid by utilising Cenvat credit and the short payment was later made good.

Analysis: The bar under the Cenvat Credit Rules applied only to using credit earned in a subsequent month for discharging duty for an earlier month. There was no prohibition against using Cenvat credit to pay a short-paid or unpaid amount once the default was noticed. Since the duty related to clearances in August was paid in September and the delay was only a few days, the payment from PLA was not necessary. If the interest itself was not legally exigible, the amount paid as interest could not be retained by the Revenue.

Conclusion: The interest payment was not required and the refund claim was allowable in favour of the assessee.

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