CENVAT credit interest liability arises only on actual utilisation, not on a mistaken but unutilised entry reversed before use.

Interest under Rule 14 of the CENVAT Credit Rules, 2004 is not attracted where credit is wrongly taken by mistake but remains unutilised and is reversed before any duty adjustment or monetary benefit is obtained. The provision was read as linking interest liability to actual utilisation of credit, not to a mere clerical taking of credit. On that basis, a mistaken entry later reversed before use does not by itself trigger recovery of interest.

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Issues: Whether interest was recoverable under Rule 14 of the CENVAT Credit Rules, 2004 when credit was wrongly taken but not utilised and was reversed on detection.

Analysis: Rule 14 provides for recovery where CENVAT credit has been taken or utilised wrongly. The credit scheme is linked to duty paid on inputs and the recipient-manufacturer derives monetary benefit only when the credit is actually utilised against duty liability. A mere mistaken taking of credit, later reversed before utilisation, does not by itself confer such benefit. Where the excess credit arose from clerical error and the assessee already had sufficient credit balance, the expression "taken or utilised" was read in the context of interest liability as requiring actual utilisation as well. On that footing, no interest was payable.

Conclusion: Interest was not recoverable from the assessee on the wrongly taken but unutilised credit.

Final Conclusion: The demand of interest was set aside and the order dropping the proceedings was restored, resulting in allowance of the appeal in favour of the assessee.

Ratio Decidendi: Interest under Rule 14 of the CENVAT Credit Rules, 2004 is not attracted where credit is merely taken by mistake but is not utilised and is reversed before any duty adjustment or monetary benefit is obtained.

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