Interest on confirmed Modvat credit demand applies to the entire unpaid amount, without separating cash and credit payments.

Interest under Section 11AA of the Central Excise Act, read with Rule 57-I(3), applies to confirmed Modvat credit demands where payment is not made within the prescribed period. The text explains that the interest provision covers demands confirmed after the amendment and extends to recovery of wrongly taken Modvat credit. It also states that, for interest calculation, no distinction is made between amounts paid in cash and amounts discharged through credit; interest is leviable on the entire unpaid confirmed demand until payment is made.

---

---

Issues: (i) Whether interest under Section 11AA of the Central Excise Act, 1944 was payable on the confirmed Modvat credit demand. (ii) Whether such interest was chargeable only on the portion paid in cash or on the entire confirmed amount.

Issue (i): Whether interest under Section 11AA of the Central Excise Act, 1944 was payable on the confirmed Modvat credit demand.

Analysis: Section 11AA, introduced with effect from 26-5-1995, provides for interest on duty confirmed under Section 11A(2) if not paid within three months. The first proviso extends the provision to demands determined before that date. In the case of recovery of wrongly taken Modvat credit, Rule 57-I(3), inserted with effect from 31-5-1995, specifically applied the interest provision to amounts not paid within three months of the demand confirmation order. Since the demand was confirmed after the amendment, the interest provision applied to the case.

Conclusion: Interest under Section 11AA read with Rule 57-I(3) was payable on the confirmed Modvat credit demand.

Issue (ii): Whether such interest was chargeable only on the portion paid in cash or on the entire confirmed amount.

Analysis: The liability to interest arises on the amount of confirmed Modvat credit that remained unpaid after the prescribed period. The statute and the rule do not create any distinction between payment made in cash and payment made through credit for the purpose of interest calculation. As the entire confirmed demand remained unpaid until April and May 2004, interest was leviable on the whole amount.

Conclusion: Interest was chargeable on the entire confirmed amount and not merely on the cash-paid portion.

Final Conclusion: The appeal failed, and the demand of interest was sustained in full.

Ratio Decidendi: Where a confirmed Modvat credit demand remains unpaid beyond the prescribed period, interest is leviable on the entire unpaid confirmed amount under the applicable recovery and interest provisions, without distinction between cash payment and payment by credit.

---