Interest on wrongly taken CENVAT credit arises on availment itself, even if reversed before utilisation.

Rule 14 of the Cenvat Credit Rules, 2004 was applied to hold that interest is payable on wrongly taken CENVAT credit even if it is reversed before utilisation. The interpretation followed the Supreme Court's view in Ind Swift Laboratories that interest liability arises on wrong availment itself, and that the words "taken, utilised wrongly, or erroneously refunded" are not to be read conjunctively. The contrary reliance on Bill Forge was rejected in light of the later binding interpretation and the Bombay High Court's distinction of that decision. The demand for interest was therefore upheld.

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Issues: Whether interest is payable on CENVAT credit wrongly taken and reversed before utilisation.

Analysis: Rule 14 of the Cenvat Credit Rules, 2004 provided for recovery of credit wrongly taken, utilised wrongly, or erroneously refunded, together with interest. The provision was applied in the light of the Supreme Court's interpretation in Ind Swift Laboratories, which held that interest liability arises on wrong availment itself and that the word "or" in the rule cannot be read as "and". The plea based on reversal before utilisation and the contrary view in Bill Forge was not accepted in view of the later binding interpretation and the Bombay High Court's distinction of Bill Forge.

Conclusion: Interest was payable on the wrongly taken credit even though it was reversed before utilisation, and the demand was upheld.

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