Voluntary reversal of credit defeats penalty where no intent to evade duty or culpable conduct is shown.

Penalty under Rule 57-I(4) was held not leviable where the assessee voluntarily reversed the credit and informed the department before issuance of the show cause notice. The governing principle applied was that penalty for wrongful availment of credit requires intention to evade duty or culpable conduct such as fraud or wilful misstatement. In the absence of any established intent to evade, and where reversal was made before proceedings were initiated, penalty could not be sustained and the Revenue's challenge failed.

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Issues: Whether penalty under Rule 57-I(4) of the Central Excise Rules was leviable where the assessee had reversed the credit and informed the department before issue of the show cause notice.

Analysis: The assessee had taken credit which was later reversed on its own and the department was informed before issuance of the show cause notice. The settled principle applied was that penalty is not attracted unless there is intention to evade duty or to wrongly avail credit by fraud, wilful misstatement, or similar culpable conduct. Where the credit was reversed voluntarily before initiation of proceedings, and no intent to evade was established, penalty could not be sustained.

Conclusion: Penalty was not leviable, and the Revenue appeal failed.

Ratio Decidendi: Penalty for wrongful availment of credit cannot be sustained in the absence of intention to evade duty, particularly where the credit is voluntarily reversed and intimated to the department before the show cause notice.

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