Wrong availment of Cenvat credit attracts only minimum penalty absent intent to evade duty.

Rule 13 of the Cenvat Credit Rules, 2002 distinguishes simple wrong availment of credit under sub-rule (1) from fraud, wilful misstatement, suppression, or other contraventions with intent to evade duty under sub-rule (2), which attracts Section 11AC of the Central Excise Act, 1944. Where the notice and adjudication rest only on Rule 13(1) and there is no allegation of intent to evade, the penalty need not be fixed at the amount of credit wrongly taken. In this matter, the penalty was reduced to the minimum under Rule 13(1), and the assessee succeeded to that extent.

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Issues: Whether the penalty imposed for wrong availment of Cenvat credit could be sustained at the amount of credit wrongly taken, or whether it was liable to be reduced to the minimum penalty under Rule 13(1) in the absence of any allegation of intention to evade duty.

Analysis: Rule 13 of the Cenvat Credit Rules, 2002 draws a clear distinction between cases of wrong availment of credit simpliciter under sub-rule (1) and cases involving fraud, wilful mis-statement, suppression, or contravention with intent to evade duty under sub-rule (2), where Section 11AC of the Central Excise Act, 1944 becomes applicable. The show cause notice and the adjudication in the present matter proceeded only on the footing of Rule 13(1), and there was no allegation that the wrong availment was accompanied by intent to evade duty. In such a situation, the maximum penalty equal to the credit wrongly availed was not mandatory, though a penalty up to that limit could be imposed under Rule 13(1).

Conclusion: The penalty could not be sustained at Rs. 18,174/- and was rightly reduced to the minimum penalty of Rs. 10,000/- under Rule 13(1); the assessee succeeded to that extent.

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