Interest on wrongly availed Modvat credit became payable from original duty determination, not from final appellate settlement.

Interest on wrongly availed Modvat credit was treated as payable once duty had been determined by the proper officer and remained unpaid within the prescribed period under Rule 57-I(3) read with Section 11AA of the Central Excise Act. The later appellate proceedings did not defer the original determination, and interest was held recoverable for the unpaid amount after Section 11AA came into force. The argument that interest could arise only from the Tribunal's final settlement was rejected, because the demand followed the original adjudication. The plea of denial of hearing also failed, as the appellate order noted hearing on the grounds of appeal.

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Issues: Liability to pay interest on wrongly availed Modvat credit under Rule 57-I(3) of the Central Excise Rules, 1944 read with Section 11AA of the Central Excise Act, 1944, including whether interest could be charged for the past period and from what date it became payable.

Analysis: The duty liability was first determined by the proper officer and the later appellate proceedings did not postpone the original determination. Under Rule 57-I(3), read with Section 11AA, interest becomes payable where duty determined under Section 11A(2) is not paid within the prescribed period, and the provision was applied to the amount that remained unpaid after the introduction of Section 11AA. The contention that interest could arise only from the date of final settlement by the Tribunal was not accepted, because the original determination had already been made and the demand for interest was raised only after the dispute had attained finality. The plea of denial of hearing was also not accepted, as the appellate order recorded hearing on the grounds of appeal.

Conclusion: Interest was lawfully leviable on the wrongly availed credit, and the challenge to the demand failed.

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