Penalty under Rule 15(2) of CENVAT Credit Rules, 2004 overturned on appeal.

The penalty under Rule 15(2) of the CENVAT Credit Rules, 2004 was set aside in the appeal. The appellant's failure to reverse CENVAT credit for obsolete goods was not intentional evasion, as the goods were written off but not physically removed. The introduction of a recovery mechanism after the show cause notice hindered the appellant's ability to contest the non-reversal. The penalty imposition was contested successfully, leading to its unsustainability and setting aside. The appeal was disposed of with the penalty under Rule 15(2) of the CCR, 2004 being overturned.

---

---

Issues: Whether penalty under Rule 15(2) of CENVAT Credit Rules, 2004 is applicable.

Analysis:
The appeal was filed against Order-in-Appeal No. MYS-EXCUS-000-ADC-APP-HAB-049-2014 dated 07.05.2014. The main issue for consideration was whether the appellant should be penalized under Rule 15(2) of the CENVAT Credit Rules, 2004 along with Section 11 AC of the Central Excise Act, 1944. The appellant had availed CENVAT credit for capital goods, inputs, and input services during March 2007 to September 2008. Due to obsolescence of stocks, provisions were made in the financial books for write-off of machinery and slow-moving inventories. The Revenue contended that the appellant should have reversed the CENVAT credit for these items. The adjudicating authority confirmed the demands, including the penalty under Rule 15(2) of the CCR, 2004. The first appellate authority dropped other penalties but upheld the penalty under Rule 15(2) of the CENVAT Credit Rules, 2004.

Upon careful consideration, it was observed that the goods were considered obsolete by the appellant and written off in the books, but they were not physically removed from the place of manufacture. Non-reversal of central excise duty for obsolete goods was not an intentional act to evade payment. It was noted that the recovery mechanism for wrongly taken CENVAT credit under Rule 3(5B) was introduced after the show cause notice was issued, making it difficult for the appellant to contest the non-reversal. The appellant contested only the penalty imposition, leading to the conclusion that the penalty under Rule 15(2) of the CCR, 2004 was unsustainable and set aside. The impugned order upholding the penalty under Rule 15(2) of the CCR, 2004 was set aside, and the appeal was disposed of accordingly.

---