Appellant rectifies cenvat credit errors, penalty set aside under Rule 15(4)

The appellate authority found that the appellant promptly rectified irregularities in cenvat credit availed on motor vehicles, input services from abroad, and for exempted services. The appellant acknowledged and rectified wrongly taken cenvat credit due to non-taxable output services. Despite a show-cause notice for demanding wrongly availed credit, interest, and penalty, the authority set aside the penalty under Rule 15(4) of Cenvat Credit Rules, citing lack of intent to evade tax. The demands for cenvat credit and interest were upheld as uncontested.

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Issues:
1. Irregular availment of cenvat credit on motor vehicles
2. Inadmissible cenvat credit on input services from abroad
3. Cenvat credit used for exempted services
4. Wrongly taken cenvat credit due to non-taxable output service
5. Demand for cenvat credit, interest, and penalty
6. Imposition of penalty under Rule 15(4) of Cenvat Credit Rules

Analysis:
1. The appellants, during an audit, acknowledged irregularities in cenvat credit availed on motor vehicles and reversed it. The counsel admitted the mistake, leading to prompt repayment.
2. Cenvat credit on input services from abroad was deemed inadmissible, although the appellant could have contested it. The credit was reversed voluntarily.
3. Cenvat credit used for exempted services was irregularly claimed, and the appellant accepted the mistake, repaying the amount with interest.
4. Wrongly availed cenvat credit due to non-taxable output service was acknowledged as a mistake by the appellant, leading to repayment with interest.
5. A show-cause notice was issued for demanding wrongly availed cenvat credit, interest, and penalty. The notice cited the appellant's irregular credit availing with an intention to evade tax, invoking Rule 14 of Cenvat Credit Rules and Section 73(1) of the Finance Act 1994.
6. The penalty was proposed under Rule 15(4) of Cenvat Credit Rules, with a reference to Section 78 of the Finance Act 1994. The original authority imposed the penalty despite the appellant's repayment and cited a Board Circular to justify the decision.
7. The appellate authority considered the appellant's lack of intention to evade tax, leading to the reversal of credit promptly. The penalty under Section 78 was set aside invoking Section 80 of the Finance Act 1994, as the appellant showed no intention to evade tax, despite procedural errors and lack of consideration of statutory provisions. The demands for cenvat credit and interest were upheld as uncontested.

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