Voluntary Cenvat credit reversal sustains duty demand, but penalty and interest fail without proof of suppression or intent to evade.
Voluntary reversal of Cenvat credit on audit detection did not bar the duty demand on limitation grounds, because the amount was appropriated and no refund claim was made. However, penalty and interest were set aside since the record did not establish suppression of facts or intent to evade duty. The operative effect is that the duty demand was sustained, while penal consequences were denied for lack of deliberate evasion.
Issues: (i) Whether the duty demand was barred by limitation when the assessee had reversed the Cenvat credit after detection by audit and had not claimed refund. (ii) Whether penalty and interest were sustainable in the absence of suppression of facts with intent to evade duty.
Issue (i): Whether the duty demand was barred by limitation when the assessee had reversed the Cenvat credit after detection by audit and had not claimed refund.
Analysis: The duty was reversed voluntarily on detection by the audit party and was appropriated by the adjudicating authority. In the absence of any refund claim, the finding that the demand was time-barred was not accepted.
Conclusion: The demand of duty was not barred by limitation and was upheld.
Issue (ii): Whether penalty and interest were sustainable in the absence of suppression of facts with intent to evade duty.
Analysis: The record did not establish suppression of facts with intent to evade payment of duty. Since the reversal was made and the circumstances did not justify a finding of deliberate evasion, the penal and interest consequences were not warranted.
Conclusion: Penalty and interest were not sustainable and were set aside.
Final Conclusion: The order was modified to uphold the duty demand while granting relief against penalty and interest, resulting in a partial success for the Revenue.
Ratio Decidendi: Where duty is reversed voluntarily upon detection and no suppression of facts with intent to evade is proved, the demand may be sustained while penalty and interest under the penal provision are not attracted.
TaxTMI 
AI Drafter ✕
TaxTMI 
