Wrongly availed Cenvat credit attracts interest, while penalty may be moderated where facts justify reduction.

Interest was held payable on wrongly availed and utilised Cenvat credit under the Central Excise law read with the Cenvat Credit Rules, and the earlier Larger Bench view relied on by the appellant was treated as no longer applicable. Penalty was also found justified because the ineligible credit had been taken more than once and was detected by audit, but the quantum was considered excessive on the facts and was reduced to Rs. 5,000. The result was that the interest demand was sustained while the penalty was retained only at a reduced amount, granting partial relief.

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Issues: (i) Whether interest was payable on the ineligible Cenvat credit that had been availed and utilised. (ii) Whether the imposition of penalty was justified and, if so, whether the amount required reduction.

Issue (i): Whether interest was payable on the ineligible Cenvat credit that had been availed and utilised.

Analysis: The credit was found to have been wrongly availed and utilised. On that basis, interest was held payable under the Central Excise law read with the Cenvat Credit Rules. The earlier Larger Bench view relied on by the appellant was noted to have been overruled.

Conclusion: Interest was payable and the demand of interest was upheld.

Issue (ii): Whether the imposition of penalty was justified and, if so, whether the amount required reduction.

Analysis: The ineligible credit had been availed on more than one occasion and was detected by audit. This justified penalty, but the quantum was considered excessive in the circumstances.

Conclusion: Penalty was justified, but its amount was reduced to Rs. 5,000/-.

Final Conclusion: The demand of interest was sustained and the penalty was retained at a reduced amount, resulting in only partial relief to the appellant.

Ratio Decidendi: Interest is payable on wrongly availed and utilised Cenvat credit, and penalty may be sustained though the quantum can be moderated on the facts.

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