Procedural credit-entry error under Cenvat law cannot sustain duty demand or penalty when duty credit is otherwise admissible.

Duty paid on inputs remained admissible as credit, and taking that credit in the PLA instead of the Cenvat credit account was treated as a procedural accounting mistake rather than a substantive breach. Where the inputs were originally procured without duty under Rule 19 and duty plus interest were later paid by TR-6 challans on diversion for domestic clearances, the demand and penalty could not be sustained because there was no dispute over the availability of credit. The resulting duty demand and penalty were set aside.

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Issues: Whether the duty demand and penalty were sustainable where duty on the inputs had been paid and the corresponding credit was taken in the PLA instead of the Cenvat credit account, resulting in a claimed procedural lapse.

Analysis: The appellants had procured inputs without payment of duty under Rule 19 of the Central Excise Rules, 2001 and had later paid the duty and interest by TR-6 challans when the goods were diverted for use in goods cleared for domestic consumption. The only lapse was that the credit of the duty paid was taken in the PLA instead of the Cenvat credit account. The adjudicating action proceeded on this accounting mistake, even though the duty paid on the inputs was otherwise admissible as credit and there was no dispute about its availability. The mistake was treated as a minor procedural error rather than a substantive violation.

Conclusion: The duty demand and penalty were not sustainable and were set aside.

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