Bona fide accounting mistake in re-credit entries cannot sustain demand or penalty when credit entitlement is undisputed and revenue is not prejudiced.

A bona fide accounting mistake in taking re-credit in PLA instead of RG 23A Part II under Rule 57F(7) did not justify demand or penalty where the entitlement to credit was undisputed and the Revenue suffered no prejudice. The error was treated as a rectifiable procedural lapse, and corresponding account adjustments could cure it. On that basis, CESTAT set aside the impugned orders and allowed the appeal in favour of the assessee.

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Issues: Whether re-credit taken in PLA instead of RG 23A Part II under Rule 57F(7) was liable to be treated as irregular so as to sustain demand and penalty.

Analysis: The re-credit was taken in the PLA because of genuine confusion arising from the prescribed accounting form and the references therein. The substantive position was undisputed: the amount re-credited was the same amount earlier debited, and the Revenue suffered no prejudice. The error was capable of being corrected by making corresponding adjustments in the accounts, and the case did not call for penal or demand proceedings on a purely accounting lapse.

Conclusion: The re-credit in the PLA was held not to justify confirmation of demand or imposition of penalty, and the issue was decided in favour of the assessee.

Final Conclusion: The impugned orders were set aside and the appeal was allowed on the footing that a bona fide procedural mistake causing no revenue loss does not warrant demand or penalty.

Ratio Decidendi: Where the entitlement to credit is undisputed and the Revenue is not prejudiced, a bona fide mistake in the account in which re-credit is taken is a rectifiable procedural lapse and cannot sustain demand or penalty.

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