Penalty for simultaneous depreciation and Cenvat credit reduced to nominal penalty after reversal on departmental objection

Wrongful simultaneous availment of depreciation and Cenvat credit, once pointed out by the department and reversed thereafter, did not justify the full statutory penalty under Section 11AC. The Tribunal treated the lapse as penal in nature but accepted that a lesser penalty was appropriate, especially where the appellant did not dispute penalty under Rule 27 of the Central Excise Rules, 2002. Accordingly, the harsher penalty was set aside and replaced with a nominal penalty under the general penalty provision.

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Issues: Whether penalty under Section 11AC was warranted for simultaneous availment of depreciation and Cenvat credit, and whether the penalty could instead be reduced under Rule 27 of the Central Excise Rules, 2002.

Analysis: The credit was reversed after the departmental objection, and the Tribunal noted that the mistake had been pointed out by the department. It further observed that, had the error not been detected, there was a possibility of both depreciation and Cenvat credit being availed. In these circumstances, the Tribunal held that penalty was attracted, but not at the level imposed under Section 11AC. The appellant did not object to penalty under Rule 27.

Conclusion: Penalty under Section 11AC was not sustained, and the penalty was reduced to Rs. 5,000 under Rule 27 of the Central Excise Rules, 2002.

Final Conclusion: The appellant obtained substantial relief as the harsh penalty was replaced by a nominal penalty under the minor penalty provision.

Ratio Decidendi: Where wrongful availment of credit is corrected after detection and the circumstances do not justify the statutory penalty under Section 11AC, a lesser penalty under the general penalty provision may be imposed.

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