Voluntary reversal of credit and bona fide conduct defeated penalty, and the employee penalty also could not survive.

Penalties were held unsustainable where CENVAT credit had been reversed voluntarily before the dispute matured and the assessee's conduct showed bona fides. The availment of credit arose from a change in technology rather than any deliberate attempt to evade duty, and once the reversal was made, the matter was treated as though credit had not been taken. On that basis, the statutory foundation for penalty did not survive. The penalty on the excise clerk also fell once the penalty on the assessee was not maintainable.

---

---

Issues: Whether the penalties imposed on the assessee and the excise clerk were sustainable where the credit had been reversed voluntarily and the conduct of the assessee showed bona fides.

Analysis: The credit was reversed before the dispute matured, and the surrounding circumstances showed that the availment of credit had arisen from a change in technology and not from any deliberate attempt to evade duty. Once the reversals were made, the situation was treated as one where credit had not been taken. On that footing, the statutory basis for penal consequences was not attracted. The penalty on the individual employee also could not survive when the penalty on the assessee itself was held unsustainable.

Conclusion: The penalties on the assessee and the excise clerk were set aside.

---