Interest on reversed Cenvat credit not recoverable where credit was reversed before notice and no wrongful availment was proved.

Interest was held not recoverable on Cenvat credit reversed by the assessee in respect of obsolete inputs, because the proportionate credit had been reversed before issuance of the show cause notice. The appellate authority also noted that the Revenue produced no material showing wrongful availment of credit in breach of the governing Cenvat provisions, so the demand for interest could not be sustained.

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Issues: Whether interest was recoverable on Cenvat credit reversed by the assessee in respect of obsolete inputs, and whether the Revenue could sustain its demand in the absence of material showing wrongful availment of credit.

Analysis: The dispute concerned interest on credit reversed after the inputs were written off but before the show cause notice. The order under challenge recorded that the assessee had reversed the proportionate credit on being pointed out, and that the reversal preceded issuance of the notice. It was also noted that no contrary evidence was brought to show that the credit had been taken in breach of the governing Cenvat provisions. On that basis, the appellate authority found that the demand for interest could not stand.

Conclusion: The demand of interest was not sustainable and the assessee succeeded on the issue.

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