Reversal of irregular CENVAT credit extinguishes interest liability and renders penalty unsustainable under the credit rules.

Once irregularly availed CENVAT credit had been reversed, no interest liability survived, as the analysis followed the larger Bench decision in the assessee's own case and the Karnataka High Court view relied on there. On that basis, the nominal penalty under Rule 15A of the CENVAT Credit Rules, 2004 was also unsustainable because it depended on the existence of interest liability. The stated conclusion is that reversal of the credit removed the basis for both interest and penalty.

---

---

Issues: Whether interest was payable on irregularly availed CENVAT credit that had already been reversed, and whether penalty under Rule 15A of the CENVAT Credit Rules, 2004 was sustainable.

Analysis: The matter was decided by following the larger Bench decision in the appellant's own case and the binding Karnataka High Court view relied upon therein. On that basis, once the irregularly availed CENVAT credit had already been reversed, no interest liability survived. In the absence of any interest liability, the nominal penalty imposed was also found unsustainable.

Conclusion: No interest was payable on the reversed CENVAT credit, and the penalty was rightly dropped.

---