Pre-notice reversal of Cenvat credit defeated interest demand on wrong credit, with the Tribunal setting aside recovery.

Interest on Cenvat credit reversed before the show cause notice was held not recoverable. The Tribunal noted that the credit had been reversed well in advance of the notice, and although the statute permits recovery of interest on wrongly taken or utilised credit, the pre-notice reversal meant the interest demand could not be sustained. The demand for interest was therefore set aside, following an earlier Tribunal view on the same point.

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Issues: Whether interest was recoverable on Cenvat credit that had been reversed before issuance of the show cause notice.

Analysis: The credit had been reversed on 19 January 2002, whereas the show cause notice was issued only on 3 June 2002. The Tribunal held that, although the statute provides for recovery of interest on wrongly taken or utilized credit, the reversal having been made well before the notice, the demand of interest was not sustainable. Reliance was also placed on an earlier Tribunal decision taking the same view.

Conclusion: Interest was not recoverable, and the demand of interest was set aside.

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