Cenvat Credit penalty upheld in principle, but reduced because the quantum was excessive on the facts.

Supply made to DMRC was held outside Rule 6(6)(vii) of the Cenvat Credit Rules, 2004, so the appellant was required to pay the prescribed amount within time, which was admittedly not done. That contravention attracted penal consequences under Rule 15(1), and penalty was therefore sustainable in principle. However, considering the facts and circumstances, the authorities' penalty was found excessive and the quantum was reduced while liability to penalty was maintained.

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Issues: Whether the appellant, having accepted the demand confirmed under Rule 14 of the Cenvat Credit Rules, 2004, was liable to penalty under Rule 15(1) of the Cenvat Credit Rules, 2004, and whether the quantum of penalty required reduction.

Analysis: The supply made to DMRC was held not to be covered by Rule 6(6)(vii) of the Cenvat Credit Rules, 2004, and the appellant was required to pay an amount equal to 5% of the value of the goods supplied within the stipulated time, which was admittedly not done. The violation of the Cenvat Credit Rules, 2004 attracted penal consequences under Rule 15(1). However, on the facts and circumstances, the penalty imposed by the authorities below was considered excessive.

Conclusion: Penalty was upheld in principle, but the amount was reduced to Rs. 10,000/-.

Final Conclusion: The penalty order was modified by reducing the quantum of penalty, while sustaining liability to penalty.

Ratio Decidendi: Where contravention of the Cenvat Credit Rules, 2004 is established, penalty may be imposed, but the quantum must be commensurate with the facts and circumstances of the case.

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