Voluntary reversal of inadmissible Cenvat credit and absence of suppression defeated interest recovery under excise law.

Interest under section 11AB of the Central Excise Act, 1944 was held unrecoverable where the inadmissible Cenvat credit had already been voluntarily reversed before the show cause notice. The absence of suppression or misdeclaration, previously recorded while deleting penalty under section 11AC and not challenged by the Revenue, supported the conclusion that interest could not be sustained. The delayed issuance of the notice, nearly three years later, also weighed against recovery because proceedings for interest must be initiated within the applicable limitation period. The matter was therefore decided in favour of the assessee.

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Issues: Whether interest under section 11AB of the Central Excise Act, 1944 could be recovered when the inadmissible Cenvat credit had been voluntarily reversed before the show cause notice and the notice for interest was issued after a delay of about three years.

Analysis: The credit was admittedly reversed before issuance of the notice, and the demand notice came nearly three years later. The finding that there was no misdeclaration or suppression of facts with intent to evade duty had already been recorded while deleting the penalty under section 11AC of the Central Excise Act, 1944, and that finding was not challenged by the Revenue. In these circumstances, the absence of suppression or misdeclaration supported the conclusion that the demand for interest could not be sustained. The delay in issuance of the notice also attracted the principle that proceedings for recovery must be initiated within the applicable limitation period, as relied upon by the Authority.

Conclusion: Recovery of interest under section 11AB of the Central Excise Act, 1944 was not sustainable and the issue was decided in favour of the assessee.

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