Tribunal upholds CENVAT credit, removes penalty for early payment. Interest justified for incorrect credit availing.

The Tribunal upheld the demand for CENVAT credit but found the imposition of penalty unwarranted as the disputed amount was paid before the show-cause notice, and there was no evidence of fraud. The appellant's argument that interest and penalty should not apply as they had reversed the disputed amount from their CENVAT register before utilization was rejected. The Tribunal determined that interest was justified due to the incorrect availing of credit. The appeal was partly allowed, with the penalty being removed based on compliance with payment before the notice and the absence of fraudulent intent.

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Issues:
1. Availment of CENVAT credit on items not classified as capital goods or input.
2. Demand of CENVAT credit along with interest and penalty.
3. Imposition of penalty under Rule 15(2) of Cenvat Credit Rules, 2004.

Analysis:
1. The appellant, engaged in manufacturing MS Billets and Non Alloy Steel Ingots, availed CENVAT credit on items not classified as capital goods or input under Rule 2(a) of the Cenvat Credit Rules, 2004. A show-cause notice was issued demanding the credit amount, interest, and penalty under Rule 15(2) of Cenvat Credit Rules, 2004 read with section 11AC of the Central Excise Act, 1944.

2. The Adjudicating Authority confirmed the demand, interest, and penalty. On appeal, the Commissioner (Appeals) upheld the decision. The appellant argued that they had already reversed the disputed amount from their Cenvat register and had not utilized it, thus interest and penalty should not apply. The Tribunal noted that the appellant had reversed the credit before the show-cause notice but had not paid interest, which is a statutory liability. The Tribunal found the availed credit was incorrect, thus interest was justified. However, as the disputed amount was paid before the notice, imposition of penalty was deemed unwarranted.

3. The Tribunal ruled that since the appellant had paid the disputed amount before the show-cause notice and there was no proof of fraud or willful misstatement, the penalty under Rule 15(2) of Cenvat Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944 was set aside. The appeal was partly allowed, and the penalty was removed based on compliance with payment before the notice and the absence of evidence of fraudulent intent.

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