Rule 26 penalty for Cenvat credit dispute reduced where credit was reversed and deliberate wrongdoing was not clearly admitted.

Penalty under Rule 26 of the Central Excise Rules, 2002 on a partner for alleged wrongful availment of Cenvat credit by a partnership firm was found excessive on the facts. The firm had already reversed the entire credit after investigation and did not contest the demand, while the appellant's statement did not amount to a clear admission of deliberate misconduct. The record showed some culpability, but the surrounding circumstances did not justify sustaining the full penalty, so it was reduced and partial relief was granted.

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Issues: Whether the penalty imposed on the partner under Rule 26 of the Central Excise Rules, 2002 for alleged wrongful availment of Cenvat credit by the partnership firm was liable to be sustained in full.

Analysis: The partnership firm had reversed the entire Cenvat credit after investigation and had not contested the demand. The appellant's statement did not amount to a clear admission of deliberate wrongdoing, and the record showed that he had expressed inability to identify the exact nature of the scrap while the firm had failed to verify whether the goods received were re-rollable scrap. In these circumstances, while some culpability was attributable to the appellant, the surrounding facts, including reversal of credit and non-contestation by the firm, showed that the penalty imposed was excessive.

Conclusion: The penalty on the appellant was not sustained in full and was reduced from Rs. 2,00,000 to Rs. 50,000, resulting in partial relief to the assessee.

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