Unutilised wrong Cenvat credit reversed voluntarily: interest and penalty unsustainable absent suppression or mala fide intent.

Wrongly taken Cenvat credit on photocopies of invoices, which was not utilised and was later reversed voluntarily, did not justify interest or penalty. The assessee's statement that the credit remained unutilised was not contradicted, and the finding of no suppression or mala fide intention to evade duty prevented invocation of penal consequences under Rule 13(2) of the Cenvat Credit Rules, 2002 read with Section 11AC of the Central Excise Act, 1944. On those facts, interest on the unutilised credit was not payable and the penalty was unsustainable.

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Issues: Whether interest and penalty were sustainable where Cenvat credit was wrongly taken on the basis of photocopies of invoices but was not utilised and was subsequently reversed voluntarily.

Analysis: The credit was taken by mistake and the assessee stated before the adjudicating authority that it had not been utilised, a position not contradicted in the order under challenge. The finding of the appellate authority that there was no suppression or mala fide intention to evade duty also told against the invocation of penal consequences under Rule 13(2) of the Cenvat Credit Rules, 2002 read with Section 11AC of the Central Excise Act, 1944. In such circumstances, interest was not payable on unutilised credit and the penalty could not be sustained.

Conclusion: Interest and penalty were not sustainable and were set aside in favour of the assessee.

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