Penalty for wrongful Cenvat credit cannot stand without fraud, suppression, or intent to evade duty.

Penalty for wrongful availment of Cenvat credit was held unsustainable where separate accounts were not maintained, because the order did not record fraud, wilful mis-statement, collusion, suppression of facts, or any intent to evade duty. Although the demand had been confirmed for non-compliance with Rule 6(2) of the Cenvat Credit Rules, 2002, penalty under Rule 13(2) and Section 11AC of the Central Excise Act, 1944 required those statutory ingredients. In the absence of such findings, the penalty was set aside.

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Issues: Whether penalty could be sustained for wrongful availment of Cenvat credit when separate accounts were not maintained, in the absence of findings of fraud, wilful mis-statement, collusion, suppression of facts, or intent to evade duty.

Analysis: The demand had been confirmed for non-compliance with Rule 6(2) of the Cenvat Credit Rules, 2002, but penalty under Rule 13(2) could arise only where wrongful credit was taken or utilised on account of fraud, wilful mis-statement, collusion, suppression of facts, or contravention with intent to evade duty. The order did not record any finding that the assessee had acted with such intent, nor did it establish any of the statutory ingredients required to attract penalty under Section 11AC of the Central Excise Act, 1944.

Conclusion: Penalty was not sustainable and was set aside; the assessee succeeded on the penalty issue.

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