Differential Cenvat credit demand set aside where later receipt of goods showed no revenue loss; penalty reduced.

Differential Cenvat credit was held unsustainable where the excess credit taken initially was later matched by receipt of the short-delivered material and no revenue loss was shown. The demand of duty was therefore set aside. The initial excess availment was still treated as a lapse attracting penalty, so penalty was sustained in principle but reduced to a lower amount in light of the facts and the limited quantum involved.

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Issues: Whether the demand of differential Cenvat credit was sustainable where credit had been taken in excess of the duty actually attributable to the quantity received, and whether penalty was warranted.

Analysis: The appellants had availed credit in excess of the CVD paid on the quantity covered by the bill of entry, but the short-received material was subsequently received. In these circumstances, no revenue loss was found to have resulted, so the demand was held to be unjustified. At the same time, the initial taking of excess credit was treated as a lapse, warranting penalty, though the quantum was considered liable to be reduced in view of the facts and the amount involved.

Conclusion: The demand of duty was set aside, while the penalty was sustained in principle and reduced from Rs. 10,000 to Rs. 2,000.

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