Unilateral re-credit of excise credit is impermissible without prescribed procedure; penalty was also set aside on the facts.

Credit reversed in assessment proceedings could not be restored suo motu without a formal order or the prescribed legal procedure; unilateral re-credit was therefore improper. However, although the procedural lapse was established, penalty was not justified on the facts because the credit had been reversed again before the impugned order and the then-existing rules did not clearly govern restoration of reversed credit. The penalty was set aside, while approval for suo motu restoration of the disputed credit was denied.

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Issues: (i) Whether the assessee could validly restore credit suo motu after reversal without following the procedure prescribed by law; (ii) whether the penalty imposed for such re-credit was sustainable.

Issue (i): Whether the assessee could validly restore credit suo motu after reversal without following the procedure prescribed by law.

Analysis: The credit had been reversed pursuant to the assessment proceedings and was later taken back without a formal order permitting such restoration. The absence of a proper challenge to the reversal and the failure to adopt the prescribed legal procedure meant that the assessee could not regularise the re-credit on its own. The law governing excise refunds and credit adjustments requires departmental scrutiny and sanctioned procedure, and unilateral restoration of credit is not permissible.

Conclusion: The suo motu re-credit was not permissible and the restoration of credit was held to be improper.

Issue (ii): Whether the penalty imposed for such re-credit was sustainable.

Analysis: Although the procedural lapse in taking back the credit was established, the record showed that the assessee had again reversed the credit well before the impugned order. The Tribunal also noted the lack of clarity in the then-existing rules governing restoration of reversed credit, which made the imposition of penalty unjustified on the facts.

Conclusion: The penalty was set aside.

Final Conclusion: The appeal succeeded only to the extent of penalty, while the assessee was not granted approval for suo motu restoration of the disputed credit.

Ratio Decidendi: Re-credit or refund-related restoration under the excise regime cannot be taken unilaterally by the assessee and must follow the procedure established by law, but penalty may not be sustained where the breach occurs in a regime lacking clear procedural guidance and the amount is subsequently reversed.

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