Penalty under Cenvat Credit Rules cannot be imposed on a registered dealer who did not avail credit, with pre-deposit waived.

Rule 13(1) of the Cenvat Credit Rules, 2002 was treated as applicable only to a person who had availed Modvat credit, not to a registered dealer/trader who merely passed on credit on duty-paid goods. On that basis, the Tribunal held that the appellant had shown a prima facie case against the penalty and was entitled to waiver of the pre-deposit and stay of recovery pending appeal.

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Issues: Whether the appellant, being a registered dealer/trader, could be subjected to penalty under Rule 13(1) of the Cenvat Credit Rules, 2002, and whether pre-deposit of the penalty was to be waived pending appeal.

Analysis: The Tribunal noted that the appellant was a trader who had passed on Modvat credit on duty-paid goods dealt with by it. Rule 13(1) of the Cenvat Credit Rules, 2002 was held to be invocable only against a person who had availed the Modvat credit and not against a registered dealer. On that basis, the Tribunal found that the appellant had made out a prima facie case for waiver of the penalty and stay of recovery.

Conclusion: The penalty pre-deposit was waived and recovery of the penalty was stayed till disposal of the appeal.

Ratio Decidendi: Penalty under Rule 13(1) of the Cenvat Credit Rules, 2002 could not be sustained against a registered dealer who had not availed the credit, where a prima facie case for relief was shown.

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