Procedural lapse in job work records did not justify penalty absent evidence of evasion or diversion of inputs.

Penalty was not sustainable where inputs sent to job workers were received back but their return was not entered in the records in time. The omission was treated as clerical and procedural, and the assessee had reversed the credit and paid interest. In the absence of evidence of diversion to the open market, irretrievable loss, or deliberate suppression to evade duty, the ingredients for penal action were not made out. The plea under Section 11A(2B) was accepted in substance, and penalty under Section 11AC of the Central Excise Act, 1944 read with Rule 15(2) of the Cenvat Credit Rules, 2004 was set aside.

---

---

Issues: Whether penalty was sustainable when the lapse in accounting for inputs sent to job workers was only procedural and there was no intention to evade duty.

Analysis: The inputs sent to job workers were found to have been received back, but the entries were not made in the records in time. The omission was treated as clerical and procedural, and the assessee had reversed the credit and paid interest. In the absence of evidence showing diversion of the materials to the open market, irretrievable loss, or any deliberate suppression to evade duty, the ingredients for penalty were not established. The plea based on Section 11A(2B) was also accepted in substance, since the matter did not disclose a culpable default warranting penal action.

Conclusion: Penalty under Section 11AC of the Central Excise Act, 1944 read with Rule 15(2) of the Cenvat Credit Rules, 2004 was not sustainable and was set aside.

---