CENVAT credit penalty enhancement set aside after prompt reversal on change in circumstances; duty and interest sustained.

Enhanced penalty for wrong availment of CENVAT credit was found unwarranted where the assessee reversed the credit shortly after noticing that the customs duty earlier paid had been refunded. The demand of duty and interest was not seriously disputed and was sustained, but the penalty enhancement was set aside because the reversal occurred soon after the changed circumstances came to light, undermining the basis for harsher penal action.

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Issues: Whether the enhancement of penalty for wrong availment of CENVAT credit was justified when the credit was reversed soon after the changed circumstances were noticed.

Analysis: The demand of duty and interest was not seriously disputed. The only substantial challenge was to the enhancement of penalty. The record showed that the assessee had reversed the CENVAT credit shortly after learning that the customs duties earlier paid had been refunded. In these circumstances, the enhanced penalty was found to be unwarranted.

Conclusion: The enhancement of penalty was set aside. The demand of duty and interest was sustained.

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