Refund eligibility survives pre-utilisation Cenvat reversal, but interest runs from credit availment until reversal.

Refund under Notification No. 40/2012-ST cannot be denied merely because Cenvat credit on specified services was initially taken, where the credit was reversed before utilisation and before the refund claim; such reversal is treated as if the credit had not been availed for refund eligibility. At the same time, interest is payable from the date credit is taken until the date of reversal, regardless of utilisation. The refund claim was therefore not rejected outright and was remanded for fresh verification of interest payment, with the assessee otherwise entitled to refund.

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Issues: (i) Whether refund under Notification No. 40/2012-ST was barred merely because Cenvat credit on specified services had initially been availed, despite reversal of such credit before utilization; (ii) Whether interest was payable from the date of availment of credit till the date of reversal.

Issue (i): Whether refund under Notification No. 40/2012-ST was barred merely because Cenvat credit on specified services had initially been availed, despite reversal of such credit before utilization.

Analysis: The condition in para 2(g) of Notification No. 40/2012-ST was examined in the light of the settled principle that credit reversed before utilization is treated as if it had not been taken. Since the credit was admittedly reversed before the refund application and was not utilized, the condition was held to be satisfied.

Conclusion: The refund could not be denied on the ground of initial availment of credit, and the assessee was entitled to refund on this issue.

Issue (ii): Whether interest was payable from the date of availment of credit till the date of reversal.

Analysis: Rule 14 was read with the Supreme Court's ruling that interest liability attaches from the date of taking credit and continues until reversal, irrespective of utilization. On that basis, the assessee was held liable to pay interest for the intervening period.

Conclusion: Interest was payable from the date of availment of credit till the date of reversal, and refund was contingent upon such payment.

Final Conclusion: The refund claim was not rejected outright, but the matter was sent back for fresh adjudication after verifying payment of interest, with the assessee otherwise entitled to refund.

Ratio Decidendi: Credit reversed before utilization is to be treated as not availed for the purpose of refund eligibility, but interest is payable from the date of taking credit until its reversal.

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