CENVAT Credit and exempted clearances: no interest payable where sufficient credit balance existed and was not actually utilised.

Interest on the amount attributable to exempted clearances was held not payable where the assessee maintained sufficient CENVAT credit balance throughout and showed that the relevant credit had not been actually utilised for that payment. Rule 6 of the CENVAT Credit Rules, as then in force, permitted discharge of the amount by debiting CENVAT credit or otherwise, and on that basis the statutory foundation for interest was not established. The interest demand was set aside, while the duty demand was maintained.

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Issues: Whether interest was payable on the amount attributable to exempted clearances when the assessee had sufficient CENVAT credit balance and had not actually utilised the credit for such payment.

Analysis: The assessee established that the combined balance in its credit records was sufficient at all relevant times. Rule 6 of the CENVAT Credit Rules then in force permitted payment of the required amount by debiting CENVAT credit or otherwise. On that footing, the claim that the credit relating to common inputs had not been utilised was accepted. In these circumstances, and following the cited precedent, the statutory basis for charging interest on the amount was not made out.

Conclusion: Interest was not payable, and the demand of interest was set aside while the duty demand was maintained.

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