CENVAT credit reversal on kerosene cleared as such: penalty sustained where mixed storage and unsupported bona fide belief failed.

Penalty was sustained for failure to reverse CENVAT credit on kerosene cleared as such to the supplier. Mixed storage of imported and indigenous kerosene did not excuse non-reversal, because the responsibility for separate accounting arose from the appellant's own arrangement and the credit scheme did not create any ambiguity on reversal of inputs cleared as such. The plea of bona fide belief and difficulty in quantification was rejected, particularly where the appellant alone held the relevant production and clearance records and the investigation found incorrect declarations and an incorrect Chartered Accountant's certificate.

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Issues: Whether penalty was sustainable for failure to reverse CENVAT credit on kerosene cleared as such to the supplier, despite mixed storage and subsequent reversal of credit.

Analysis: The appellant did not dispute the duty reversal or interest liability and confined the challenge to penalty. The record showed that imported and indigenous kerosene were stored together with the appellant's knowledge and that the responsibility for separate accounting arose from the concession sought by the appellant. The applicable CENVAT credit scheme did not create ambiguity regarding reversal when inputs were cleared as such. The explanation of difficulty in quantification and bona fide belief was not accepted, particularly because the appellant alone had the relevant production, clearance, and accounting details and the investigation found incorrect declarations and an incorrect Chartered Accountant's certificate.

Conclusion: Penalty was upheld and the appeal was dismissed.

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