Cenvat credit reversal and duplicate penalty were rejected where duty default was later cured with interest

Duty paid through the Cenvat credit account after withdrawal of the fortnightly payment facility was not treated as an irregularity warranting reversal where the default was subsequently cured by payment through PLA with interest; the related demand was therefore unsustainable. The document also states that no further penalty was justified because the same default had already been visited with penalty under Rule 173Q of the Central Excise Rules, 1944. The impugned order was sustained in full, and the revenue challenge failed.

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Issues: (i) Whether duty paid through Cenvat credit account after withdrawal of the fortnightly payment facility could be treated as irregular and whether the demand could be sustained when the amount was later paid through PLA with interest. (ii) Whether any further penalty was warranted after the default had already been visited with penalty under the relevant rules.

Issue (i): Whether duty paid through Cenvat credit account after withdrawal of the fortnightly payment facility could be treated as irregular and whether the demand could be sustained when the amount was later paid through PLA with interest.

Analysis: The default committed by the respondent stood rectified by payment through PLA along with interest. In that situation, the respondent remained entitled to the Cenvat credit taken through the credit account, and the demand for reversal of such credit was not justified.

Conclusion: The demand of duty was not sustainable and the finding dropping the demand was upheld.

Issue (ii): Whether any further penalty was warranted after the default had already been visited with penalty under the relevant rules.

Analysis: Since the default had already been penalized under Rule 173Q of the Central Excise Rules, 1944, no additional penalty was called for on the same conduct.

Conclusion: No further penalty was warranted.

Final Conclusion: The impugned order was sustained in full, with the revenue challenge failing and the connected cross objection not giving rise to any separate relief.

Ratio Decidendi: Where the duty default is subsequently cured by payment through PLA with interest, the assessee cannot be denied the related Cenvat credit, and no additional penalty is justified once the same default has already been penalized under the applicable rules.

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