Cenvat credit reversal on written-off inputs does not by itself justify interest where no reversal was legally required.

Interest cannot be levied on Cenvat credit reversed for clinker written off in the books where the underlying credit was not legally required to be reversed. The cited decisions and Board circular supported the position that credit on inputs written off did not attract mandatory reversal, and once no lawful reversal obligation existed, there was no basis to charge interest merely because the amount was later debited in the credit account. The assessee's failure to dispute the reversal did not create a liability in law. The interest demand was therefore unsustainable and consequential relief followed.

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Issues: Whether interest was payable on Cenvat credit reversed in respect of clinker written off in the books of account, when the credit itself was not legally required to be reversed.

Analysis: The input credit related to unusable clinker which had been written off in the balance sheet. The relevant legal position, as supported by the cited decisions and the Board circular, was that credit on inputs written off was not required to be reversed. Once the underlying reversal was not legally warranted, there could be no basis to demand interest on the amount subsequently debited by the assessee. The fact that the assessee did not dispute the reversal did not create liability to interest where none existed in law.

Conclusion: Interest demand was not sustainable and the issue was decided in favour of the assessee.

Final Conclusion: The impugned order confirming interest was set aside and the appeal succeeded with consequential relief.

Ratio Decidendi: Where Cenvat credit on inputs written off is not legally required to be reversed, no interest can be levied merely because the amount was later debited in the credit account.

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