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Issues: (i) Whether penalty was sustainable for excess availment of CENVAT credit when the credit was reversed on being pointed out; (ii) whether the order on interest liability called for interference.
Issue (i): Whether penalty was sustainable for excess availment of CENVAT credit when the credit was reversed on being pointed out.
Analysis: The appellant had availed credit in excess of the service tax actually paid and later reversed the inadmissible credit after audit pointed out the error. The notice invoked Rule 14 of the CENVAT Credit Rules, 2004 read with Section 11AB of the Finance Act, 1994, but did not allege mala fides. Reversal of the credit on being pointed out was treated as evidence of bona fide conduct.
Conclusion: Penalty was not sustainable and was set aside in favour of the assessee.
Issue (ii): Whether the order on interest liability called for interference.
Analysis: The interest had already been paid by the appellant, and no further interference was considered necessary on that aspect.
Conclusion: No interference was made with the interest liability.
Final Conclusion: The appeal succeeded only to the extent of deletion of penalty, while the interest component was left undisturbed.
Ratio Decidendi: Where excess CENVAT credit is reversed on being pointed out and the record does not disclose mala fides, penalty is not warranted, though interest liability may still remain.
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