Voluntary reversal of excess Cenvat credit sustains demand and interest, but penalty fails without fraud or suppression.

Excess Cenvat credit reversed by the assessee through a revised return, with the credit account showing sufficient balance and regularisation on record, sustained the demand of credit and the consequential interest. Penalty under Rule 15(2) read with Section 11AC was not justified because the material did not establish fraud, collusion, wilful misstatement, suppression of facts, or intent to evade duty. On that basis, the penal component was set aside while the credit demand and interest remained in force.

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Issues: (i) whether the demand of Cenvat credit along with interest was sustainable; (ii) whether penalty under Rule 15(2) of the Cenvat Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944 was warranted.

Issue (i): whether the demand of Cenvat credit along with interest was sustainable.

Analysis: The appellant did not contest the substantive credit demand and had reversed the excess credit on its own by filing a revised return. The record showed that the credit account reflected sufficient balance and that the excess credit had been regularised. In these circumstances, the demand and consequential interest were upheld.

Conclusion: The demand of Cenvat credit and the interest liability were sustained.

Issue (ii): whether penalty under Rule 15(2) of the Cenvat Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944 was warranted.

Analysis: Penalty under Section 11AC requires proof of fraud, collusion, wilful misstatement, suppression of facts, or intent to evade duty. The material on record showed reversal of the excess credit and regularisation through revised return, with no satisfactory basis to infer suppression or intent to evade. On that footing, invocation of the penal provision was not justified.

Conclusion: The penalty was not sustainable and was set aside.

Final Conclusion: The substantive credit demand and interest remained in force, but the penal component was deleted.

Ratio Decidendi: Penalty under Section 11AC can be imposed only on proof of fraud, collusion, wilful misstatement, suppression of facts, or intent to evade duty; where excess credit is voluntarily reversed and regularised without such elements, the penalty cannot be sustained.

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