Penalty on director for wrong Cenvat credit denied where the company, not the director, availed the credit.

Penalty under Rule 13 of the Cenvat Credit Rules, 2002 was confined to the person who actually took wrong Cenvat credit or otherwise contravened the rules in relation to inputs or capital goods. Where the credit had been availed by the company and not by its director in his personal capacity, the rule did not permit penalty to be imposed on the director merely because of his position in the company. Penalty on the director was therefore held impermissible, and the finding went in favour of the assessee.

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Issues: Whether penalty under Rule 13 of the Cenvat Credit Rules, 2002 could be imposed on the director of a company when the wrong Cenvat credit was availed by the company.

Analysis: Rule 13, as applicable during the relevant period, fastened liability on the person who took Cenvat credit wrongly or contravened the rules in relation to inputs or capital goods. The penalty provision was thus directed against the person who actually availed the credit. Since the credit in question had been taken by the company and not by the director in his capacity, the rule did not authorize imposition of penalty on him merely because he was a director.

Conclusion: Penalty under Rule 13 of the Cenvat Credit Rules, 2002 could not be imposed on the director, and the finding was in favour of the assessee.

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