JudgmentJudgment Hemant Gupta, J. 1. The challenge in the present writ petition is to the order, Annexure P-11, dated 16-8-2007 calling upon the petitioner to deposit a sum of Rs. 49,27,473/- towards the balance amount of interest in pursuance of the order passed by the Settlement Commission on 19-1-2007. 2. The petitioner company is engaged in the manufacture of bulk drugs classifiable under Chapter 30 of the First Schedule to the Central Excise Tariff Act, 1985 (for short the Tariff Act). The petitioner during 1-11-2001 to 31- 3-2006 received invoices. On the basis of such invoices, the petitioner claimed CENVAT credit of Rs. 6,50,44,412/-. Out of the said amount, the petitioner utilized credit of Rs. 5,71,47,148/- only. On 8-3-2006, staff of the Director General of Central Excise Intelligence searched factory as well as corporate office of the petitioner. The Directors of the company admitted wrong availment of above-said CENVAT credit. It is the case of the petitioner that a sum of Rs. 4 crores was deposited through 8 TR-6 challan in the month of March, 2006. In November 2006, the petitioner reversed CENVAT amounting to Rs. 1,45,67,660/-. The petitioner also deposited a sum of Rs. 25,79,488/- through RG 23A Pt-II vide entry Nos. 1766, 1767 and 1768 dated 22-2-2006. Thus, total sum of Rs. 5,71,47,148/- was deposited towards wrongly availed CENVAT credit. 3. The petitioner was served with a show cause notice on 8-12-2006 to recover the amount of Rs. 5,66,35,470/- as excise duty and Rs. 5,11,678/- as education cess fraudulently availed by the petitioner under Rule 12 of the CENVAT Credit Rules, 2001-02 and Rule 14 of CENVAT Credit Rules, 2004 read with Section 11A of the Central Excise Act, 1944 (for short the Act). It was also proposed as to why a sum of Rs. 5,71,47,148/- already deposited by the petitioner should not be appropriated against the credit demanded. The show cause notice was also served for imposition of penalty and interest. 4. The petitioner invoked the jurisdiction of the Custom and Central Excise Settlement Commission on 21-11- 2006 under Section 32E(2) of the Central Excise Act, 1944 . The Settlement Commission passed an order on 19-1- 2007 settling the proceedings initiated by the aforesaid show cause notice. No further duty was payable over and above the amount deposited i.e., Rs. 5,71,47,148/-. There was immunity granted from penalty. The Settlement Commission passed an order on 19-1- 2007 settling the proceedings initiated by the aforesaid show cause notice. No further duty was payable over and above the amount deposited i.e., Rs. 5,71,47,148/-. There was immunity granted from penalty. However, in respect of interest, Settlement Commission ordered as under :- Immunity from interest in excess of 10% simple interest per annum is granted. Accordingly, the applicant shall pay simple interest @ 10% per annum on CENVAT credit wrongly availed (i.e. Rs. 5,71,47,148/-) from the dates the duty became payable as per Section 11AB of the Act till the dates of payment. Revenue is directed to calculate the amount of interest as per this order and intimate the same to the applicant within 15 days of the receipt of this order. Thereafter, the applicant shall pay the amount of interest within 15 days of the receipt of the said intimation and report compliance both to the Bench and to Revenue . 5. On 22-3-2007, the petitioner was called upon to deposit interest amounting to Rs. 1,47,90,065/- as the amount of Rs. 4 crores was said to be actually debited by the petitioner on 31-1-2007 in its Personal Ledger Account. It was also communicated that interest liability is to be calculated from the date of wrong availment of credit and not from its utilization. The petitioner moved a miscellaneous application before the Settlement Commission for clarification of its order so as to quantify the actual interest liability. The Settlement Commission held that interest is payable from the date CENVAT credit was wrongly availed and not from the date of utilization of a part of balance of such credit. It was also found that such issue was not raised in the settlement proceedings, therefore, final order passed in the matter was conclusive and the same cannot be reopened. It was thereafter on 16-8-2007, the interest liability was reworked out to Rs. 1,19,27,443/-. The petitioner was called upon to pay the balance amount of interest of Rs. 49,27,473/- after adjusting Rs. 70 lacs deposited by the petitioner earlier. It is the said order which is subject matter of challenge in the present writ petition. 6. It was thereafter on 16-8-2007, the interest liability was reworked out to Rs. 1,19,27,443/-. The petitioner was called upon to pay the balance amount of interest of Rs. 49,27,473/- after adjusting Rs. 70 lacs deposited by the petitioner earlier. It is the said order which is subject matter of challenge in the present writ petition. 6. Learned counsel for the petitioner relied upon the order passed by the Supreme Court in case reported as Commissioner of Central Excise, Mumbai-I v. Bombay Dyeing & Mfg Company Limited, 2007 (215) E.L.T. 3 (S.C.) = 2007 (8) SCC 177, to contend that since the assessee is free to reverse the credit before utilization of CENVAT credit and, therefore, liability of payment of tax does not fall on the assessee even if CENVAT credit has been wrongly taken. The availment of credit by itself does not create any liability of payment of any excise duty. The availment of CENVAT credit enables an assessee to off set such credit against the excise duty payable in terms of Rule 3(4) of the CENVAT Credit Rules, 2004 (for short Credit Rules). It is further argued that the respondents are not justified in claiming interest on the amount of Rs. 50 lacs till 31-1-2007 when the amount was deposited on 8-3-2006 through treasury challan. 7. The controversy between the parties revolves around the following two issues :- (a) Whether interest is payable from the date CENVAT credit was, admittedly, wrongly availed by the petitioner or interest is payable till the date the duties were actually paid ? (b) Whether the deposit of Rs. 50 lacs through TR-6 challan on 8-3-2006 is a valid leading to cessation of interest thereafter or that the interest is payable till personal ledger account was debited on 31-1-2007. 8. Section 11AB of the Act contemplate payment of interest in case any duty of excise has not been levied or paid or has been short-levied or short paid or erroneously refunded. Rule 3 of the Credit Rules allow a manufacturer or producer of final products or a provider of taxable service to take credit of the duty of excise duty and other duties as detailed therein. Such CENVAT credit can be utilized for payment of any duty of excise on any final product as mentioned in sub-clause (4) of Rule 3. Rule 3 of the Credit Rules allow a manufacturer or producer of final products or a provider of taxable service to take credit of the duty of excise duty and other duties as detailed therein. Such CENVAT credit can be utilized for payment of any duty of excise on any final product as mentioned in sub-clause (4) of Rule 3. The conditions for allowing CENVAT credit are contained in Rule 4 whereas Rule 14 deals with recovery of CENVAT credit wrongly taken or erroneously refunded. The relevant provisions of law read as under :- Central Excise Act, 1944 Section 11AB. Interest on delayed payment of duty. - (1) Where any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded, the person who is liable to pay the duty as determined under sub-section (2), or has paid the duty under sub-section (2B), of section 11A, shall, in addition to the duty, be liable to pay interest at such rate not below [ten per cent.] and not exceeding thirty-six per cent. per annum, as is for the time being fixed by the Central Government, by notification in the Official Gazette, from the first date of the month succeeding the month in which the duty ought to have been paid under this Act, or from the date of such erroneous refund, as the case may be, but for the provisions contained in sub-section (2), or sub-section (2B), of section 11A till the date of payment of such duty : (emphasis added) xx xx xx xx xx Cenvat Credit Rules, 2004 Rule 3. Cenvat credit - (1) A manufacturer or producer of final products or a provider of taxable service shall be allowed to take credit (hereinafter referred to as the CENVAT credit) of- (i) the duty of excise specified in the First Schedule to the Excise Tariff Act, leviable under the Excise Act; xx xx xx xx xx (2) and (3) xx xx xx xx (4) The CENVAT credit may be utilized for payment of - (a) any duty of excise on any final product; or (b) to (e) xx xx xx xx Rule 4. Conditions for allowing Cenvat credit. - (1) The CENVAT credit in respect of inputs may be taken immediately on receipt of the inputs in the factory of the manufacturer or in the premises of the provider of output service. Conditions for allowing Cenvat credit. - (1) The CENVAT credit in respect of inputs may be taken immediately on receipt of the inputs in the factory of the manufacturer or in the premises of the provider of output service. xx xx xx xx xx Rule 14. Recovery of Cenvat credit wrongly taken or erroneously refunded. - Where the CENVAT credit has been taken or utilized wrongly or has been erroneously refunded, the same along with interest shall be recovered from the manufacturer or the provider of the output service and the provisions of sections 11A and 11AB of the Excise Act or sections 73 and 75 of the Finance Act, shall apply mutatis mutandis for effecting such recoveries. 9. The scheme of the Act and the CENVAT Credit Rules framed thereunder permit a manufacturer or producer of final products or a provider of taxable service to take CENVAT credit in respect of duty of excise and such other duties as specified. The conditions for allowing CENVAT credit are contained in Rule 4 of the Credit Rules contemplating that CENVAT credit can be taken immediately on receipt of the inputs in the factory of the manufacturer or in the premises of the provider of output service. Such CENVAT credit can be utilized in terms of Rule 3(4) of Credit Rules for payment of any duty of excise on any final product and as contemplated in the aforesaid sub-rule. It, thus, transpires that CENVAT credit is the benefit of duties leviable or paid as specified in Rule 3(1) used in the manufacture of intermediate products etc. In other words, it is a credit of the duties already leviable or paid. Such credit in respect of duties already paid can be adjusted for payment of duties payable under the Act and the Rules framed thereunder. Under Section 11AB of the Act, liability to pay interest arises in respect of any duty of excise has not been levied or paid or has been short levied or short paid or erroneously refunded from the first day of the month in which the duty ought to have been paid. Interest is leviable if duty of excise has not been levied or paid. Interest can be claimed or levied for the reason that there is delay in the payment of duties. The interest is compensatory in nature as the penalty is chargeable separately. 10. Interest is leviable if duty of excise has not been levied or paid. Interest can be claimed or levied for the reason that there is delay in the payment of duties. The interest is compensatory in nature as the penalty is chargeable separately. 10. In Pratibha Processors v. Union of India, 1996 (88) E.L.T. 12 (S.C.) = (1996) 11 SCC 101, it was held that interest is compensatory in character and is imposed on an assessee who has withheld payment of any tax as and when it is due and payable. The levy of interest is geared to actual amount of tax withheld and the extent of the delay in paying the tax on the due date. It is compensatory and different from penalty which is penal in character. Similarly, in Commissioner of Customs v. Jayathi Krishna & Co. - 2000 (119) E.L.T. 4 (S.C.) = (2000) 9 SCC 402, it was held that interest on warehoused goods is merely an accessory to the principal and if principal is not payable, so is it for interest on it. In view of the aforesaid principle, we are of the opinion that no liability of payment of any excise duty arises when the petitioner availed CENVAT credit. The liability to pay duty arises only at the time of utilization. Even if CENVAT credit has been wrongly taken, that does not lead to levy of interest as liability of payment of excise duty does not arise with such availment of CENVAT credit by an assessee. Therefore, interest is not payable on the amount of CENVAT credit availed of and not utilized. 11. Reliance of respondents on Rule 14 of the Credit Rules that interest under Section 11AB of the Act is payable even if CENVAT credit has been taken. In our view, said clause has to be read down to mean that where CENVAT credit has been taken and utilized wrongly, interest should be payable on the Cenvat credit taken and utilized wrongly. Interest cannot be claimed simply for the reason that the CENVAT credit has been wrongly taken as such availment by itself does not create any liability of payment of excise duty. On a cojoint reading of Section 11AB of the Act and that of Rules 3 and 4 of the Credit Rules, we hold that interest cannot be claimed from the date of wrong availment of CENVAT credit. On a cojoint reading of Section 11AB of the Act and that of Rules 3 and 4 of the Credit Rules, we hold that interest cannot be claimed from the date of wrong availment of CENVAT credit. The interest shall be payable from the date CENVAT credit is wrongly utilized. 12. The argument of learned counsel for the respondents in respect of the second question of interest is that though the amount of Rs. 50 lacs was deposited on 8-3-2006, but PLA account having been debited on 31-1-2007, therefore, interest is payable upto 31-1-2007 and the amount became available to Central Government on 31-1- 2007 only. It is contended that all other seven challans contain an entry that such deposit is towards duty payable against CENVAT credit taken by the petitioner and detected by the Director General of Central Excise Intelligence, New Delhi. It is, thus, contended that since PLA account was debited only on 31-1-2007, therefore, even if the amount of Rs. 50 lacs was deposited on 8-3-2006, the same cannot be taken into consideration in the absence of suitable endorsement on the said challan. It is argued that recital in the show cause notice that an amount of Rs. 4 crores was deposited, was wrongly averred as till such time PLA account is debited, the amount is not available with the Central Government as such amount cannot be appropriated by the department. 13. Firstly, the factual basis need to be noticed. In Para 14 of show cause notice, it is clearly averred that Rs. 4 crores stand deposited including treasury challan dated 8-3-2006. The said deposit of Rs. 4 crores was noticed by the Settlement Commission in its final order. Even in communication Annexure P-4 dated 31-1-2007, Superintendent Central Excise has communicated that Rs. 4 crores deposited during March, 2006 including through Challan dated 8-3-2006 is yet to be debited with the Government exchequer. It was in pursuance of such communication, the petitioner made a debit entry of Rs. 4 crores in its personal ledger account. 14. The Central Government in the Central Excise Law Manual, Chapter 3 Part V has clarified in clause 3.3 as under :- 3.3 There is an Explanation to sub-rule (1) of rule 5 that the duty liability shall be deemed to have been discharged only if the amount payable is credited to the account of the Central Government by the specified date. It is being interpreted that it refers to deposit of duty amount by the focal point banks into the account of Government. This is not the intention. Once the assessee has deposited a cheque in bank and the same is honoured or pays in cash/drafts and the bank gives receipt stamp on TR-6 challans, the same shall be treated as credited to the account of the Central Government. 15. Such clarification stipulates that once the assessee has deposited a cheque in bank and the same has been honoured and the bank gives receipt stamp on TR-6 challans, the same shall be treated as credited to the account of the Central Government. The fact that payment of Rs. 50 lacs was taken into consideration in the show cause notice and in the order passed by the Settlement Commission, in fact, supports clarification given in Clause 3.3 of the Central Excise Manual, Chapter 3, Part V, reproduced above. It appears that PLA account was debited by the petitioner on 31-1-2007 as sought by the respondents. It may be noticed that the argument of the respondents is contradictory. If the benefit of Rs. 50 lacs is to be granted to the petitioner on 31-1-2007, then there is no reason as to why interest is not being claimed on the balance amount of Rs. 350 lacs also debited to PLA account on 31-1- 2007. The explanation that such challans contained the endorsement of payment of duty against CENVAT credit detected by the Director General of Central Excise Intelligence, New Delhi, is not material as the respondents treated the entire amount of Rs. 4 crores as deposit towards the excise duty even in the show cause notice and in the order passed by the Settlement Commission. The respondents have not disputed the said payment before the Settlement Commission; therefore, the respondents cannot be permitted to dispute the date of payment of the said amount in its calculations subsequently. 16. Consequently, we are of the opinion that the respondents have wrongly claimed interest on the CENVAT credit from the date the same was wrongly availed and that the respondents are not entitled to claim interest on the amount of Rs. 50 lacs upto 31-1-2007 as the said amount was deposited on 8-3-2006. 17. 16. Consequently, we are of the opinion that the respondents have wrongly claimed interest on the CENVAT credit from the date the same was wrongly availed and that the respondents are not entitled to claim interest on the amount of Rs. 50 lacs upto 31-1-2007 as the said amount was deposited on 8-3-2006. 17. The writ petition is disposed of with the direction to the respondents to re-calculate the amount of interest keeping in view the observations made in the body of this order. No costs.