Interest on ineligible Cenvat credit depends on Section 11AB's pre- and post-amendment treatment of duty-linked liability.

Interest on ineligible Cenvat credit turned on the pre- and post-14-05-2001 position under Section 11AB. For the period before the amendment, interest required allegations of fraud, suppression, misstatement or collusion to evade duty, and the notice did not invoke those ingredients; interest was therefore not payable. After the amendment, Section 11AB made interest follow the duty demand, so interest applied to the amount reversed for the post-amendment period. The credit related to inputs used in repairing and reconditioning machinery cleared without duty, and reversal of the credit itself was not in dispute.

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Issues: Whether interest was payable under Section 11AB on ineligible Cenvat credit availed before 14-05-2001 and reversed later, and whether interest was payable for the period after the amendment to Section 11AB.

Analysis: The dispute concerned credit taken on inputs used in repairing and reconditioning machinery cleared without duty, where reversal of the credit itself was not contested. For the period prior to 14-05-2001, liability to pay interest under Section 11AB depended on invocation of the ingredients of fraud, suppression, misstatement or collusion to evade duty, and the show cause notice did not invoke those ingredients. The amendment to Section 11AB from 14-05-2001 altered the position so that interest followed the demand for duty, thereby covering the post-amendment period.

Conclusion: Interest was not payable on the ineligible Cenvat credit availed prior to 14-05-2001, but interest was payable on the amount reversed for the post-amendment period.

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