Excise penalty on CENVAT credit reversal turns on factual findings where the issue was legally debatable.

Penalty under excise law need not depend on proof of mens rea, but the authority may still assess whether the assessee intended to evade duty or acted on a debatable interpretation of law. Where the dispute arose from conflicting judicial views on reversal of CENVAT credit and the assessee later deposited the amount, mere non-reversal did not automatically justify penalty. On the facts found, penalty was not warranted and no substantial question of law arose for interference.

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Issues: Whether penalty was sustainable under Section 11AC of the Central Excise Act, 1944 and Rule 13(2) of the Cenvat Credit Rules when the dispute concerned reversal of CENVAT credit and the assessee had later deposited the amount.

Analysis: Penalty under the excise law does not require proof of mens rea as a condition precedent. Even so, the authority imposing penalty may consider whether the assessee was attempting to evade duty or was acting under a debatable interpretation of the law. Where the liability itself arose because of conflicting judicial views and the issue was one of interpretation, the mere non-reversal of credit does not automatically justify penalty. The existence or otherwise of penalty in such circumstances is a question of fact.

Conclusion: Penalty was not warranted on the facts found, and no substantial question of law arose for interference.

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