Cenvat credit recovery requires wrongful availment plus utilisation; without proof of use, demand, interest and penalty fail.

Rule 14 of the Cenvat Credit Rules, 2004 was treated as permitting recovery only where credit was both wrongly availed and actually utilised. The assessee's contention that sufficient undisputed credit remained unutilised, and that no proof of utilisation of the disputed credit was shown, undermined the demand for credit recovery, interest and penalty. The record also indicated overlap with an earlier departmental recovery, raising double-recovery concerns. In the absence of demonstrated duty short payment, revenue loss, or findings of suppression, fraud, misstatement or intent to evade, the basis for extended limitation and penalty was not made out.

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Issues: Whether the demand of Cenvat credit, interest and penalty was sustainable where the disputed credit was alleged to have been wrongly availed, but the assessee claimed sufficient unutilized credit balance, no actual utilization for duty payment, and no loss of revenue.

Analysis: Rule 14 of the Cenvat Credit Rules, 2004, as amended, contemplates recovery only when credit is both wrongly availed and utilized. The record showed that the appellate authority did not deal with the assessee's core contention that sufficient undisputed credit balance was available and that no proof of utilization of the disputed credit was furnished. The demand also overlapped with an earlier recovery already effected by the Department, resulting in double recovery. In the absence of demonstrated short payment of duty or revenue loss, and applying the principle of revenue neutrality, there was no basis for interest or penalty as well. The absence of findings on suppression, fraud, misstatement, or intent to evade duty also weakened the case for penalty and extended limitation.

Conclusion: The demand, interest, and penalty were not sustainable and were liable to be set aside in favour of the assessee.

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