Interest on Unutilised Cenvat Credit was denied where excess credit stayed as a book entry without real duty payment delay.

Interest under Section 11AB of the Central Excise Act, 1944 was held not recoverable on excess Cenvat credit taken on capital goods where the credit remained substantially unutilised. The tribunal treated interest as compensatory and linked to delayed payment of duty or actual enjoyment of revenue by the exchequer; mere wrong availment, without corresponding utilisation, did not create interest liability. Because the excess credit stayed only as a book entry in the proforma account and was used only to a minimal extent, Rule 12 of the Cenvat Credit Rules, 2002 did not support recovery of interest. The assessee therefore succeeded.

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Issues: Whether interest was payable on excess Cenvat credit availed on capital goods when the credit remained unutilised except for a small amount.

Analysis: The assessee had taken full credit in the year of receipt instead of restricting it to the admissible half, but the excess credit remained only as an entry in the proforma account and was not used for payment of duty, save for a small utilisation of Rs. 120/-. Interest under Section 11AB of the Central Excise Act, 1944 is compensatory in nature and is intended to offset delay in payment of duty or enjoyment of revenue by the exchequer. Where the wrongly availed credit is not actually utilised, there is no corresponding delay in payment of duty so as to attract interest liability. On these facts, Rule 12 of the Cenvat Credit Rules, 2002 did not justify recovery of interest.

Conclusion: Interest was not payable on the unutilised excess credit, and the assessee succeeded.

Ratio Decidendi: Interest under Section 11AB is recoverable only for delayed payment or utilisation of credit that results in revenue loss to the exchequer; mere wrongful availment of credit, without utilisation, does not by itself attract interest liability.

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