Penalty under Section 11AC requires intent to evade; wrongly availed but unutilised Cenvat credit reversed after detection did not attract it.

Penalty under Section 11AC of the Central Excise Act was not sustainable where Cenvat credit was wrongly availed but never utilised and was reversed after the error was detected by audit. The provision applies only when non-payment, short payment, or wrongful availment is accompanied by fraud, collusion, wilful misstatement, suppression of facts, or contravention with intent to evade duty. On the facts noted, the Revenue failed to establish the requisite intent to evade, so the penalty could not be imposed.

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Issues: Whether penalty under Section 11AC of the Central Excise Act, 1944 was sustainable where Cenvat credit was wrongly availed but not utilised and was reversed after detection.

Analysis: Penalty under Section 11AC is attracted only when non-payment, short payment, or wrongful availment of duty-related credit is shown to have occurred by reason of fraud, collusion, wilful misstatement, suppression of facts, or contravention with intent to evade duty. On the facts found, the assessee had taken credit in error, had not utilised it, and reversed it after audit pointed out the mistake. The Revenue did not establish the requisite intent to evade payment of duty.

Conclusion: The penalty was not sustainable and the assessee succeeded on this issue.

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