Modvat credit recorded only as a book entry did not justify recovery of interest without actual utilisation

Interest on wrongly taken Modvat credit could not be recovered where the credit was only reflected as an entry in RG-23A Part-II and was not actually utilised. The assessee had claimed credit without the required certificate under Rule 57E of the Central Excise Rules, 1944, but the Tribunal found on facts that the credit was never availed in substance. As no duty liability arose from mere book entry without actual availment of credit, the demand for interest failed. Interest was therefore not recoverable from the assessee.

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Issues: Whether interest was recoverable on Modvat credit said to have been wrongly taken when the credit was reflected only as an entry in the Modvat records and not actually utilised.

Analysis: The assessee had claimed Modvat credit in the absence of the requisite certificate under Rule 57E of the Central Excise Rules, 1944. The authorities disallowed the credit, but the Tribunal found as a fact that the assessee had not actually availed the credit and had merely made an entry in RG-23A Part-II. On that factual basis, and since no duty liability arose in the absence of actual availment of credit, the claim for interest could not be sustained.

Conclusion: Interest was not recoverable from the assessee.

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