Mistaken excess Modvat credit without use or mala fides cannot sustain penalty; prompt reversal defeats penal action.

Penalty was not justified for mistaken availment of excess Modvat credit where the credit was never utilised, was reversed immediately after departmental objection, and no mala fide intention was shown. The record showed the excess credit was taken inadvertently and remained open to scrutiny, so mere availment of the incorrect credit was insufficient to support penal action. The penalty was therefore set aside.

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Issues: Whether penalty was justified when excess Modvat credit was taken by mistake, remained unutilised, and was reversed immediately on being pointed out.

Analysis: The excess credit was taken inadvertently, was never utilised, and was reversed at once after the departmental objection. On these facts, no mala fide intention could be attributed to the assessee, and mere availment of excess credit, being apparent from the record and open to scrutiny, was not sufficient to sustain penalty.

Conclusion: Penalty was not justified and was set aside.

Ratio Decidendi: Penalty cannot be sustained for mistaken availment of excess credit where the credit remains unutilised, is reversed promptly, and no mala fide intention is established.

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