CENVAT Credit Interest turns on actual utilisation, not mere entry in the account; exemption opt-out requires credit availability check.

Interest on wrongly taken CENVAT credit is attracted only when the credit is actually utilised and gives the assessee an undue benefit; mere entry of credit in the account without utilisation does not by itself create interest liability. In the context of opting for exemption and reversing credit on stock adjustment, the crucial question is whether sufficient credit was available on the date of opting out. If available credit was adequate, later physical reversal does not create a benefit warranting interest. If the balance was insufficient, the shortfall is liable to be paid with interest. The text states that the factual position on availability of credit required verification for limited determination of any interest payable.

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Issues: Whether interest was payable on CENVAT credit that had been wrongly taken but not utilised, and whether interest could be levied where exemption was opted for and reversal of credit was required on adjustment of stock and available credit.

Analysis: Interest on credit balance is not attracted merely because credit was entered in the account if it remained unutilised. Liability arises where wrongly taken credit is actually utilised and gives the assessee an undue advantage. Where exemption is opted for and an adjustment in the CENVAT account is required, the relevant enquiry is whether sufficient credit was available on the date of opting out. If sufficient credit existed, later physical reversal does not by itself create any benefit to the assessee, and interest is not payable. If the available credit is insufficient, the balance must be paid with interest.

Conclusion: Interest is payable only on wrongly taken credit that has been utilised. On the respondent's plea that sufficient credit was available during the relevant period, the matter required factual verification and was remitted for limited determination of the quantum of interest, if any.

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