Cenvat credit penalty not sustainable where credit use stayed within statutory limits and no fraud or suppression was shown

Penalty under the Cenvat credit regime was not sustainable where credit on capital goods was taken in full but utilised only within the statutory restriction under Rule 4(2)(a), and no fraud, wilful misstatement, collusion, or suppression of facts was found. On those facts, penalty under Rule 13 of the Cenvat Credit Rules, 2002 read with Section 11AC of the Central Excise Act, 1944 was held not exigible, and the Revenue challenge failed.

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Issues: Whether penalty under Rule 13 of the Cenvat Credit Rules, 2002 read with Section 11AC of the Central Excise Act, 1944 was justified when credit on capital goods was taken in full but utilized only to the extent permitted by Rule 4(2)(a) of the Cenvat Credit Rules, 2002.

Analysis: The respondent had taken credit on the capital goods in full, but the utilization of such credit was within the restriction prescribed by law. There was no finding of fraud, wilful misstatement, collusion, or suppression of facts. In these circumstances, the appellate authority's view that the penalty was not sustainable was consistent with the legal position applied in similar cases.

Conclusion: The penalty was not exigible and the deletion of penalty was in law; the Revenue's challenge failed.

Ratio Decidendi: Penalty under the Cenvat credit regime and Section 11AC of the Central Excise Act, 1944 cannot be sustained where credit is taken and utilized in accordance with the statutory restriction and no fraudulent or suppressive conduct is established.

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