Cenvat credit mismatch justified demand, but penalties were deleted for absence of suppression and bona fide belief.

Cenvat credit taken on inputs was treated as irregular because the invoice description did not match the actual processed goods supplied by the dealer, and the assessee had already reversed the credit with interest after admitting the mistake. The demand was sustained. Penalties on the assessee and its Director were set aside because the record did not show suppression of facts or deliberate evasion, and the assessee acted under a bona fide belief that the credit was admissible and that the dealer had followed the procedure. The decision therefore sustained the credit demand but deleted the penal consequences.

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Issues: (i) Whether the assessee had irregularly availed cenvat credit on inputs received from the dealer; (ii) Whether penalty under the Central Excise law was sustainable on the assessee and its Director.

Issue (i): Whether the assessee had irregularly availed cenvat credit on inputs received from the dealer.

Analysis: The invoice described the goods as lead sub-oxide, but the dealer had imported lead ingots, subjected them to processing through a job worker, and thereafter supplied lead sub-oxide to the assessee. The tariff classification of the goods differed, and the assessee had already reversed the credit along with interest after admitting the mistake.

Conclusion: The credit was irregularly availed and the demand was upheld.

Issue (ii): Whether penalty under the Central Excise law was sustainable on the assessee and its Director.

Analysis: The material on record did not show suppression of facts or any deliberate evasion. The assessee acted under a bona fide belief that the credit reflected in the invoice was admissible and that the dealer had complied with the applicable procedure. In these circumstances, penal consequences were held to be unwarranted.

Conclusion: The penalties on the assessee and its Director were set aside.

Final Conclusion: The adjudication sustained the credit demand but granted relief by deleting the penalties, resulting in a partial allowance of the appeals.

Ratio Decidendi: Penalty under excise law is not justified where credit is reversed and there is no suppression of facts, particularly when the assessee acts under a bona fide belief.

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