Specific allegation in show cause notice required before Cenvat penalty can be sustained under Rule 13

Penalty under Rule 13 of the Cenvat Credit Rules, 2002 requires a show cause notice to allege the specific clause said to have been contravened. Where the notice fails to identify the precise violation, the basis for penalty is absent and the demand cannot be sustained. Prior payment of duty and interest does not cure the defect in the notice for penalty purposes. On that reasoning, penalty was held not exigible and the Revenue's appeal was rejected.

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Issues: Whether penalty under Rule 13 of the Cenvat Credit Rules, 2002 was sustainable when the show cause notice did not allege contravention of any specific clause of that rule.

Analysis: Penalty proceedings require a clear and specific allegation of the precise clause said to have been violated. Where the notice fails to identify the particular contravention under Rule 13, the foundation for imposing penalty is absent. The prior payment of duty and interest does not by itself cure the defect in the notice for the purpose of penalty, and in the absence of a specific charge the penalty cannot be sustained.

Conclusion: Penalty under Rule 13 of the Cenvat Credit Rules, 2002 was not exigible and the Revenue's appeal was rejected.

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