Mandatory interest on reversed Modvat credit follows delayed payment after confirmation of the liability.

Interest under Section 11AA of the Central Excise Act was treated as payable on wrongly availed Modvat credit once the reversal had been confirmed and the amount was not paid within the prescribed period. The governing rules, including Rule 57I(3) and Rule 57U(8), were read as mandatory, making interest arise automatically on delayed payment of the confirmed amount. Payment only after appellate proceedings did not remove the liability. The demand for interest was therefore sustained.

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Issues: Whether interest under Section 11AA of the Central Excise Act was payable on the amount of wrongfully availed and subsequently reversed modvat credit.

Analysis: The disputed demand arose from irregular credit availed on inputs and capital goods, the reversal of which had been confirmed and upheld in earlier proceedings. Rule 57I(3) and Rule 57U(8) of the Central Excise Rules expressly provided that if the determined amount was not paid within the stipulated period, interest was payable under Section 11AA. The language of the rules was treated as mandatory, and the liability to pay interest was held to arise automatically on delayed payment of the confirmed amount. The fact that the amount was paid only after the appellate proceedings did not affect the interest liability.

Conclusion: Interest under Section 11AA was payable and the demand was valid.

Final Conclusion: The appeal failed and the order confirming interest on the delayed payment of the reversed credit was sustained.

Ratio Decidendi: Where credit reversal is confirmed and the governing rules provide for interest on non-payment within the prescribed period, interest becomes mandatory and recoverable on delayed payment of the confirmed amount.

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