Interest on Cenvat credit requires wrongful credit or a valid duty demand; absent both, the demand fails.

Interest under the Cenvat Credit Rules, 2002 is recoverable only where credit is taken or utilised wrongly, and Section 11AB of the Central Excise Act, 1944 operates only alongside a valid demand under Section 11A. Where the credit was found to have been properly availed and correctly utilised, and no duty demand survived under the governing recovery provisions, the statutory basis for interest was absent. The interest demand was therefore unsustainable and was set aside in favour of the assessee.

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Issues: Whether interest could be demanded on the duty amount when the credit was held to have been properly taken and correctly utilized and no demand of duty survived under the relevant recovery provisions.

Analysis: Rule 12 of the Cenvat Credit Rules, 2002 permits recovery of interest only where Cenvat credit has been taken or utilised wrongly. Section 11AB of the Central Excise Act, 1944 operates in conjunction with a valid invocation of Section 11A of that Act. The credit in question was found to have been properly availed and correctly utilised, and no demand of duty was confirmed either under Rule 12 or under Section 11A. In that situation, the statutory basis for demanding interest was absent.

Conclusion: The interest demand was not sustainable and was set aside in favour of the assessee.

Final Conclusion: The appeal succeeded because the conditions for levy and recovery of interest were not established on the facts found by the Tribunal.

Ratio Decidendi: Interest under the Cenvat credit and central excise recovery scheme is not independently recoverable unless the underlying wrongful credit or duty demand is legally attracted under the governing recovery provision.

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