Interest on wrongly availed Modvat credit arises only after adjudication determines the recoverable amount.

A validating fiscal provision permitting recovery of wrongly availed Modvat credit did not abolish the existing adjudicatory recovery mechanism under the Central Excise Rules. The Court held that interest under Section 112(2)(b) could arise only after the amount recoverable was determined through an order in original, and not while show cause notices were still pending. The thirty-day payment period was linked to that adjudication order, so interest could not be levied from the date of assent to the Finance Act, 2000. Recovery and interest liability therefore had to be worked out through the statutory procedure first.

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Issues: Whether interest under Section 112(2)(b) of the Finance Act, 2000 could be levied on recovery of Modvat credit even when the show cause notices were still pending and no adjudication had been made.

Analysis: Section 112 validated denial of credit of duty on high speed diesel oil and permitted recovery of wrongly taken credit, but it did not dispense with the recovery mechanism under Rule 57-I of the Central Excise Rules, 1944. The provision was construed harmoniously with the existing Modvat recovery scheme. The Court held that recovery proceedings and determination of the amount remained necessary, and the liability to pay interest could arise only after the demand was determined by the order in original. The period of thirty days for payment under Section 112(2)(b) was therefore linked to the adjudication order, not to the date of assent to the Finance Act, 2000.

Conclusion: The Tribunal was not right in holding that interest could be levied without adjudication of the pending show cause notices; interest became payable only after expiry of thirty days from the date of determination by the order in original, and not from any earlier date.

Ratio Decidendi: Where a validating fiscal provision permits recovery of wrongly availed credit but does not expressly abolish the adjudicatory mechanism, the recovery and interest liability must be worked out through the existing statutory procedure, and interest cannot run before determination of the amount recoverable.

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