Modvat credit penalty not sustained where records were proper, reversal was prompt, and no fraudulent intent was shown.

Penalty for wrongful availment of Modvat credit is not justified where the credit was entered in statutory records, reversed promptly after departmental objection, and interest was paid. On these facts, the conduct did not show fraudulent intent, mala fide suppression, or any attempt to gain by wrongful availment, especially where the disputed amount was small against the available balance. The penalty was therefore rightly deleted, and the Revenue's challenge failed.

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Issues: Whether penalty was imposable in respect of wrong availment of Modvat credit when the credit was reversed promptly, interest was paid, the entries were made in statutory records, and there was no material showing fraudulent intention or suppression for the purpose of penalty.

Analysis: The respondents had taken the credit through regular entries in the statutory records and reversed it soon after being pointed out by the department. Interest on the amount was also paid. The available credit balance was substantial and the disputed amount was relatively small, supporting the absence of any motive to gain by wrongful availment. On these facts, the conduct did not disclose mala fide intention or fraudulent suppression warranting penalty.

Conclusion: Penalty was rightly set aside and the finding against the respondents on suppression, insofar as it related to penalty, was not sustainable.

Final Conclusion: The appeal by Revenue failed, and the order deleting penalty was sustained.

Ratio Decidendi: Penalty for wrongful availment of Modvat credit is not justified where the credit is reflected in statutory records, reversed promptly on detection, and the facts do not show fraudulent intent or mala fide suppression.

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