Wrongly taken Cenvat credit without utilisation: interest and penalty were held not payable after voluntary reversal.

Interest was held not payable on wrongly taken Cenvat credit where the credit had not been utilised and was voluntarily reversed before adjudication. On the same facts, penalty was also found unwarranted because the unutilised credit had been reversed and no surviving basis for penal action remained. The result was that the demand of interest and penalty was set aside, with consequential relief granted.

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Issues: Whether interest and penalty were leviable where Cenvat credit was wrongly taken but not utilised and was subsequently reversed.

Analysis: The appellant had taken Cenvat credit on waste cloth and later reversed the entire credit before adjudication. The demand of interest was based on Section 11AB of the Central Excise Act, 1944, and penalty was imposed under Rule 13 of the Cenvat Credit Rules, 2002. The Tribunal followed the view that interest is not payable on wrongly taken credit when such credit has not been utilised. Since the credit was voluntarily reversed and no utilisation was shown, the basis for penalty also did not survive.

Conclusion: Interest was not leviable and penalty was not warranted.

Final Conclusion: The demand of interest and penalty was set aside, and the appeal succeeded with consequential relief.

Ratio Decidendi: Interest on wrongly taken Cenvat credit is not payable unless the credit has been utilised, and voluntary reversal of unutilised credit negates penalty.

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