Cenvat credit penalty need not equal duty amount where the rules permit a lesser penalty.

Under Rule 15 of the Cenvat Credit Rules, 2004, penalty for wrongful availment of cenvat credit is not compulsorily fixed at the amount of duty involved. The document explains that, even where credit was allegedly taken on fake documents from non-existent suppliers, a harmonious reading of Rule 15(1) and Rule 15(2) does not support the contention that penalty must equal duty. The appellate authority could therefore sustain a lesser penalty, and the reduction made by the Commissioner (Appeals) was upheld while the Revenue's challenge was rejected.

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Issues: Whether the penalty imposed for wrongful availment of cenvat credit could be reduced below the duty amount and whether the Commissioner (Appeals) was justified in doing so.

Analysis: The demand arose from alleged availment of cenvat credit on the strength of fake documents from non-existent suppliers. The recovery notice was issued under Rule 12 of the Cenvat Credit Rules read with Section 11A of the Central Excise Act. The penalty provisions under Rule 15(1) and Rule 15(2) of the Cenvat Credit Rules, 2004 were considered, and it was noted that Rule 15(2) is pari materia with the earlier Modvat provision. On a harmonious reading of Rule 15(1) and Rule 15(2), the contention that the penalty cannot be less than the duty involved was held to have no legal support.

Conclusion: The reduction of penalty by the Commissioner (Appeals) was upheld and the Revenue's challenge was rejected.

Ratio Decidendi: Under Rule 15 of the Cenvat Credit Rules, 2004, the penalty for wrongful availment of cenvat credit is not mandatorily fixed at the amount of duty involved, and the appellate authority may sustain a lesser penalty where the rule so permits.

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