Mere availment of Cenvat credit without utilisation does not by itself attract interest or penalty in a bona fide interpretational dispute.

Cenvat credit on Education Cess and Secondary and Higher Secondary Education Cess taken on inputs procured from a 100% EOU was found admissible in the stated circumstances. The Tribunal applied the principle that mere entry of credit in the Cenvat account is distinct from utilisation, and that interest or penalty does not automatically follow where the credit is reversed before use. Because the dispute turned on a bona fide interpretation of the Cenvat Credit Rules, the demand for interest and penalty was held unsustainable, and the impugned order was set aside.

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Issues: Whether Cenvat credit taken on Education Cess and Secondary and Higher Secondary Education Cess paid on inputs procured from a 100% EOU was admissible, and whether mere availment of such credit without utilisation could sustain interest and penalty.

Analysis: The credit dispute arose from the interpretation of Rule 3(1) of the Cenvat Credit Rules, 2004 in relation to additional duty under Section 3 of the Customs Tariff Act and the cess levied under the Finance Act. The credit had been reflected in the Cenvat account and reversed before utilisation. The governing legal position applied by the Tribunal was that mere taking of credit is distinct from utilisation of credit, and interest or penalty does not automatically arise where the credit has not been utilised. The facts also showed a bona fide interpretational dispute, making the demand unsustainable.

Conclusion: The credit was held admissible in the circumstances, and the demand of interest and penalty could not be sustained.

Final Conclusion: The impugned order was set aside and the appeal was allowed in full.

Ratio Decidendi: Mere availment of Cenvat credit, without utilisation, does not by itself attract interest or penalty where the dispute is one of bona fide legal interpretation.

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