Interest on wrongly taken credit requires statutory determination and default; pre-notice reversal defeats liability.

Wrongly taken credit attracts recovery and interest provisions under Rule 57AH read with Sections 11A, 11AA and 11AB, but interest under Section 11AA arises only after duty is determined under Section 11A(2) following notice under Section 11A(1), and the person then fails to pay within three months. Where the credit is reversed before issue of notice, those statutory conditions for fastening interest are not satisfied. Interest was therefore not payable.

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Issues: Whether interest was payable on wrongly taken credit that was reversed before issue of notice.

Analysis: Rule 57AH applies the recovery and interest provisions of Sections 11A, 11AA and 11AB to credit wrongly taken. The liability to interest under Section 11AA arises only where duty has been determined under Section 11A(2), following a notice under Section 11A(1), and the person fails to pay within three months from the date of such determination. Here the credit had already been reversed before the notice was issued, so the statutory conditions for fastening interest were not met.

Conclusion: Interest was not payable, and the assessee's challenge succeeded.

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