Interest on wrongly utilised excise credit remains payable where later repayment relief is non-retrospective

Interest on wrongly utilised AED (GSI) credit was analysed under the recovery scheme in Section 88(4) of the Finance Act, 2004 read with Section 11AB of the Central Excise Act, 1944. The later repayment mechanism introduced by Section 124 of the Finance Act, 2005, carrying a non-obstante clause, was treated as non-retrospective and applicable only where the wrong utilisation had not already been discharged before the 2005 amendment. Because the disputed credit had been reversed in December 2004, the 2005 scheme did not apply, and interest remained payable from the date of wrongful utilisation until payment.

---

---

Issues: Whether interest on wrongly utilised AED (GSI) credit accrued prior to 01.04.2000 and used for payment of basic excise duty and special excise duty was governed by Section 11AB of the Central Excise Act, 1944 read with Section 88(4) of the Finance Act, 2004, or by the later mechanism introduced by Section 124 of the Finance Act, 2005.

Analysis: The credit taken in 2003 on pre-01.04.2000 AED (GSI) was found to be wrongly utilised after the retrospective amendment to Rule 3(6) of the Cenvat Credit Rules, 2002. Under Section 88(4) of the Finance Act, 2004, recovery of such wrongly utilised credit along with interest was attracted through the recovery machinery of the Cenvat Credit Rules, 2002 and Section 11AB of the Central Excise Act, 1944. The later insertion of sub-sections (5) and (6) by Section 124 of the Finance Act, 2005 contained a non-obstante clause and a concessional repayment scheme, but it was held to be non-retrospective and applicable only where the wrong utilisation had not already been discharged before the 2005 amendment. Since the appellant had reversed the disputed credit in December 2004, the 2005 scheme did not apply, and interest remained payable under Section 11AB from the date of wrongful utilisation until payment.

Conclusion: The interest demand under Section 11AB was upheld and the contention based on Section 124 of the Finance Act, 2005 failed.

Ratio Decidendi: A later non-obstante repayment scheme that is not retrospective does not displace the earlier statutory interest liability for wrong utilisation of credit already repaid before the scheme came into force.

---