Cenvat credit reversal on job-worker capital goods within the permitted period does not attract interest liability.

Cenvat credit on capital goods sent to a job worker remained valid under Rule 4(5)(a) of the Cenvat Credit Rules, 2002, which permits such movement for processing while preserving credit entitlement. The Board circular also recognised dispatch of capital goods to the job worker's premises. As the credit was reversed within the 180-day period permitted by the rule, the delayed reversal did not create interest liability. The assessee was therefore entitled to refund of the interest paid.

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Issues: Whether interest was payable on delayed reversal of Cenvat credit taken on capital goods sent to a job worker, where the reversal was made within the period permitted under the governing rule.

Analysis: Rule 4(5)(a) of the Cenvat Credit Rules, 2002 permits capital goods to be sent to a job worker for processing and related purposes while preserving credit entitlement, and the Board circular also recognises such movement of capital goods to the job worker's premises. Since the capital goods were dispatched and the credit was reversed within the 180-day period contemplated by the rule, the delayed reversal did not attract interest liability.

Conclusion: Interest was not payable, and the assessee was entitled to refund of the interest paid.

Ratio Decidendi: Where Cenvat credit on capital goods sent to a job worker is reversed within the period allowed by the applicable rule, no interest liability arises merely on account of the delay in reversal within that permitted period.

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