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AI Drafter - (New and Powerful) ✕ Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter.
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Issues: Whether interest under Rule 14 of the Cenvat Credit Rules, 2004 read with Section 11AB of the Central Excise Act, 1944 is payable from the date of taking wrong credit, even if the credit was reversed before utilization.
Analysis: Rule 14 provides that where CENVAT credit has been taken or utilized wrongly, the amount along with interest is recoverable, and the word "or" is to be read disjunctively. The binding decision of the Supreme Court in Ind-Swift Laboratories held that interest on irregular credit arises from the date the credit is wrongly taken, irrespective of whether it is utilized. The contrary reliance on Bill Forge was found inapplicable on facts, as that case involved reversal before the duty liability arose, whereas here the wrong credit remained in the account for a substantial period and the factual setting showed that duty liabilities were being met from the credit account.
Conclusion: Interest was payable from the date the wrong credit was taken, even without proof of utilization, and the assessee's contention was rejected.
Ratio Decidendi: Under Rule 14 of the Cenvat Credit Rules, 2004, interest becomes payable as soon as credit is wrongly taken, and actual utilisation is not a condition precedent where the credit entry itself is irregular.
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