Prompt reversal of excess Cenvat credit without utilisation barred penalty and interest where no revenue loss was shown.

Excess Cenvat credit on capital goods was taken contrary to the Cenvat Rules, but it was reversed immediately when pointed out, was never utilised, and caused no loss to the Revenue. On those facts, the authorities found no basis to impose penalty or interest, and the appellate record disclosed no legal infirmity in that approach. Penalty under Section 11AC and interest under Section 11AB were therefore not leviable, and the Revenue's challenge failed.

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Issues: Whether penalty and interest were leviable where excess Cenvat credit on capital goods was taken in the first financial year, reversed immediately on being pointed out, and no amount was utilised or revenue loss caused.

Analysis: The credit was taken contrary to the Cenvat Rules, but it was reversed immediately after the mistake was pointed out. The amount was not utilised and there was no loss to the Revenue. In these circumstances, the authorities below treated the matter as not warranting penalty or interest, and the appellate record did not disclose any legal infirmity in that approach.

Conclusion: Penalty under Section 11AC and interest under Section 11AB were not leviable on the facts found.

Final Conclusion: The order denying penalty and interest was sustained and the Revenue's challenge failed.

Ratio Decidendi: Where excess credit is promptly reversed without utilisation and no revenue loss results, penal and interest consequences are not attracted on the facts as found.

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