Wrongful Cenvat Credit Penalty not warranted where invoice appeared regular and excess credit was later reversed with interest.

Penalty for wrongful Cenvat credit under Rule 13(1) was held unsustainable where credit was taken on the face of a registered dealer's invoice, the invoice did not disclose any upstream 100% EOU origin, and the excess credit was later reversed with interest. The Tribunal noted that, at the time credit was taken, no apparent irregularity was shown in the invoice itself, and the subsequent reversal cured the excess element. On that basis, the penalty was deleted and the challenge to penalty succeeded.

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Issues: Whether penalty was sustainable under Rule 13(1) of the Cenvat Credit Rules, 2002 where the appellant had taken credit on the basis of a registered dealer's invoice, the invoice did not disclose the dealer's source from a 100% EOU, and the excess credit was subsequently reversed with interest.

Analysis: Penalty under Rule 13(1) applies where Cenvat credit is taken wrongly or in contravention of the Rules. The credit taken by the appellant was confined to the duty reflected in the dealer's invoice, and at that stage there was no apparent irregularity. The invoice did not indicate that the goods had originated from a 100% EOU or that the dealer had availed credit on that basis. Once the excess credit became identifiable, the appellant reversed it along with interest.

Conclusion: Penalty under Rule 13(1) was not warranted and was set aside in favour of the appellant.

Final Conclusion: The impugned penalty was deleted, and the appeal succeeded on the limited challenge to penalty.

Ratio Decidendi: Penalty for wrongful Cenvat credit is not attracted where credit is taken on the face of a regular dealer's invoice without disclosure of the upstream EOU origin, and the excess credit is later reversed with interest.

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