Cenvat credit penalty applies despite post-detection reversal where suppression, clandestine removal, and inadmissible HSD credit are established.

Penalty under Rule 13 of the Cenvat Credit Rules, 2001 read with Section 11AC of the Central Excise Act, 1944 remained attracted where the record showed shortage of inputs, clandestine removal, and wrongful availing of Cenvat credit on HSD, which was excluded from eligible inputs under Rule 2(g). Payment or reversal made only after Revenue detection did not convert the case into a voluntary pre-SCN deposit situation, and did not by itself negate penalty where suppression and the other ingredients of Section 11AC were present. The Tribunal distinguished authorities relied on by the assessee and treated the prior deposit as insufficient to defeat penal consequences.

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Issues: Whether penalty under Rule 13 of the Cenvat Credit Rules, 2001 read with Section 11AC of the Central Excise Act, 1944 was liable to be restored where the assessee had removed inputs clandestinely, availed inadmissible credit on HSD, and reversed or deposited the amount only after detection by the Revenue.

Analysis: The material on record showed shortage of inputs, clandestine removal, and availing of Cenvat credit on HSD, which was expressly excluded from the definition of eligible inputs under Rule 2(g) of the Cenvat Credit Rules, 2001. The debit of the amount was made only after detection by the Revenue. On those facts, the case involved suppression and could not be equated with a mere voluntary pre-SCN payment situation. The Tribunal distinguished the precedents relied upon by the assessee and held that prior deposit after detection does not, by itself, negate the applicability of penalty where the ingredients of Section 11AC are otherwise satisfied.

Conclusion: The penalty was rightly attracted and the order setting it aside was unsustainable.

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