Belated reversal of MODVAT credit on capital goods attracts interest, even where removal was effected by another person.

Interest is payable on belated reversal of MODVAT credit taken on capital goods removed as such, because credit is not admissible once such goods are removed and the assessee must reverse it under Rule 57U. The obligation to reverse the credit is not limited to cases where the assessee itself effects the removal; removal by any person does not change the requirement. As the reversal was made after delay, interest accrued for the period of belated payment. The demand for interest was upheld and the appeal was dismissed.

---

---

Issues: Whether interest was payable on delayed reversal of MODVAT credit taken on capital goods removed as such.

Analysis: Under Rule 57U, credit is not admissible on capital goods removed as such, and the assessee must reverse the credit. The liability to reverse is not confined to removals by the assessee alone; removal of the capital goods by any person does not alter the requirement. Since the credit was reversed belatedly, interest became payable for the period of delay.

Conclusion: The demand of interest was upheld and the appeal was dismissed.

Ratio Decidendi: Where MODVAT credit on capital goods is reversed after delay, interest is payable for the period of belated payment, irrespective of who physically removed the capital goods.

---