Interest on delayed MODVAT credit reversal remained payable after duty confirmation and later principal payment.

Rule 57-I of the Central Excise Rules, 1944 provided for disallowance and recovery of wrongly taken MODVAT credit, determination of the amount by the proper officer, and interest if the amount was not paid within the prescribed period. Where the duty liability had already been confirmed and the assessee later paid the principal without interest, the statutory liability to interest continued for the delay. The interest obligation applied whether the amount was determined under sub-rule (1)(iii) or paid pursuant to the demand mechanism under sub-rule (2), read with Section 11AA of the Central Excise Act, 1944.

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Issues: Whether interest was payable on the delayed payment of the MODVAT credit reversal amount where the duty liability had already been confirmed and the amount was paid later without interest.

Analysis: Rule 57-I of the Central Excise Rules, 1944 contemplated disallowance and recovery of wrongly taken credit, determination of the amount by the proper officer, and payment of interest if the amount determined or demanded was not paid within the prescribed period. The liability did not cease merely because the assessee eventually paid the principal amount. Once the earlier challenge to the demand had been dismissed and the duty amount stood confirmed, the statutory scheme attracted interest for the period of delay, whether the amount was determined under sub-rule (1)(iii) or paid pursuant to the demand mechanism under sub-rule (2), read with Section 11AA of the Central Excise Act, 1944.

Conclusion: Interest was payable and the assessee's challenge failed.

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