CENVAT credit reversal before utilisation does not attract interest, where no actual duty benefit was taken.

Excess CENVAT credit on capital goods, though availed, was not utilised and the remaining balance was reversed before the show-cause notice after being pointed out by audit. As the appellant had sufficient credit balance during the disputed period and no actual duty benefit was taken through utilisation, the principle applied was that reversal before utilisation does not attract interest. Interest was therefore not payable on the excess credit and the demand could not be sustained.

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Issues: Whether interest was payable on excess CENVAT credit availed but not utilised and reversed before issuance of the show-cause notice.

Analysis: The excess credit on capital goods was available in the next financial year and was not utilised. The remaining credit was reversed on being pointed out by audit, well before the show-cause notice. The appellant had sufficient balance in the CENVAT account during the disputed period, and the credit entry had not resulted in actual utilisation of duty benefit. In such circumstances, the case was covered by the principle that reversal of credit before utilisation does not attract interest.

Conclusion: Interest was not payable on the excess CENVAT credit, and the demand could not be sustained.

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