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of <h1>Tribunal sets aside penalty and interest on unused Cenvat credit due to non-production</h1> The Appellants availed full Cenvat credit on capital goods but later reversed 50% credit. The Adjudicating Authority imposed a penalty and recovery of ... Penalty and interest - Cenvat/Modvat - Capital goods Issues involved: Availing full Cenvat credit, reversal of credit, imposition of penalty, recovery of interest, violation of rules.Summary:Availing and Reversal of Credit:The Appellants availed full Cenvat credit on capital goods in the same financial year but later reversed 50% credit upon detection by Central Excise Officers. The Adjudicating Authority confirmed a duty demand and imposed a penalty under Rule 13 of Cenvat Credit Rules along with recovery of interest under Section 11AB of the Central Excise Act, 1944.Imposition of Penalty and Recovery of Interest:The Appellant, through their Advocate, argued that since the credit was not utilized as per the Adjudication Order, the penalty and interest imposition were unjustified. Reference was made to a Tribunal decision supporting this stance.Contentions of the Parties:The Advocate contended that the Appellant did not utilize the excess credit due to the non-commencement of production in a new factory during the relevant period. The Tribunal's precedent in a similar case supported the argument that penalty and interest should not apply when credit reversal was not utilized.Decision and Rationale:Upon review, it was found that the Appellant indeed did not utilize the excess credit, and there was no production or clearance of goods during the relevant period. Despite acknowledging a rule violation, it was considered that as a newly established factory with no production, a cautionary approach was more appropriate than imposing a penalty. The Adjudicating Authority's order was set aside, and the appeal was allowed with consequential relief.Conclusion:The judgment highlighted the importance of considering the specific circumstances of a case, such as the stage of operations of a new factory, in determining the appropriate course of action regarding penalty and interest in matters of Cenvat credit availing and reversal.
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