Cenvat credit reversed before utilisation does not trigger interest or penalty when excess credit is not consumed.

Where accumulated Cenvat credit on common input services is reversed before utilisation, no interest liability arises because the credit is only availed and not actually used. The note applies the principle that reversal of excess credit before consumption negates interest, and non-utilisation of the balance credit does not by itself attract penalty. On that basis, the stated conclusion is that interest and penalty were not payable and the demand was set aside.

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Issues: Whether interest and penalty were payable where accumulated Cenvat credit on common input services was reversed before utilization.

Analysis: The appellant had availed and utilized common input service credit only to the extent permitted under Rule 6(3)(c) of the Cenvat Credit Rules, leaving a balance in the credit account. That excess accumulated credit was reversed before it was used. The governing principle applied was that where credit is merely availed but reversed without utilization, no interest liability arises, and non-utilization of accumulated credit before reversal does not attract interest.

Conclusion: Interest and penalty were not payable. The appeal succeeded and the demand was set aside.

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