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Issues: (i) Whether the demand of interest on wrongly availed Cenvat credit was barred by limitation in the absence of an allegation invoking the extended period; (ii) Whether penalty could be imposed under Section 11AC of the Central Excise Act, 1944 read with Rule 15 of the Cenvat Credit Rules, 2004 without allegations of suppression, fraud or wilful misstatement.
Issue (i): Whether the demand of interest on wrongly availed Cenvat credit was barred by limitation in the absence of an allegation invoking the extended period.
Analysis: The show cause notice did not allege suppression or any other ingredient necessary for invoking the extended period. The demand for interest arose from credit reversed after detection by audit, and the legal position applied in the case treated the limitation under the excise recovery mechanism as applicable to interest demands as well. The contrary view relied upon by the lower authority had already been set aside, and the governing authority held that such a demand must be made within the prescribed limitation period.
Conclusion: The demand of interest was barred by limitation and could not be sustained.
Issue (ii): Whether penalty could be imposed under Section 11AC of the Central Excise Act, 1944 read with Rule 15 of the Cenvat Credit Rules, 2004 without allegations of suppression, fraud or wilful misstatement.
Analysis: The show cause notice did not contain allegations attracting the ingredients of Section 11AC. In the absence of such foundational allegations, mandatory penalty could not be imposed. The order of the adjudicating authority was also internally inconsistent, as it proceeded under Section 11AC while imposing a reduced penalty, which was impermissible.
Conclusion: The penalty was unsustainable and was set aside.
Final Conclusion: Both the interest demand and the penalty failed on merits, and the appellant succeeded in the appeal.
Ratio Decidendi: A demand of interest or penalty in excise proceedings cannot be sustained beyond limitation, or under Section 11AC, unless the requisite allegations and statutory ingredients for such recovery are specifically pleaded and established.
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