Cenvat credit penalty and limitation turned on suppression, voluntary reversal, and intent to evade in this dispute.

Penalty for irregular Cenvat credit on capital goods from a 100% EOU depended on whether suppression, wilful misstatement, or intent to evade was established, and whether the extended limitation period under Section 11A of the Central Excise Act, 1944 applied. One Member treated the excess credit as detected on departmental verification and found the reversal not voluntary, supporting extended limitation and penalty under Rule 13(2) of the Cenvat Credit Rules, 2002 and Rule 15(2) of the Cenvat Credit Rules, 2004. The other Member viewed it as a computation error with voluntary intimation and reversal, finding no mala fide or suppression. The Members differed, and the matter was referred to a third Member without final adjudication on merits.

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Issues: Whether penalty was imposable for irregular availment of Cenvat credit on capital goods received from a 100% EOU, and whether the show cause notice and penalty proceedings were barred by limitation.

Analysis: One Member held that the appellant had irregularly availed excess credit, that the department's verification had brought the discrepancy to light, and that the reversal of credit was not voluntary. On that view, the ingredients of suppression and intent to evade were present, the extended period under Section 11A of the Central Excise Act, 1944 was available, and penalty under Rule 13(2) of the Cenvat Credit Rules, 2002 and Rule 15(2) of the Cenvat Credit Rules, 2004 was justified. The other Member held that the matter was only a case of wrong computation of otherwise admissible credit, that the assessee itself informed the Revenue and reversed the credit, and that no mala fide or suppression was shown; on that view, the penalty was not warranted and the delayed initiation of proceedings weighed against penalty.

Conclusion: The Members recorded a difference of opinion on the sustainability of the penalty and on the limitation objection; the appeal was not finally decided on merits in the order.

Final Conclusion: The matter was referred for resolution by a third Member, so no conclusive final adjudication on the penalty issue emerged from the order itself.

Ratio Decidendi: A penalty for irregular Cenvat credit turns on whether suppression, wilful misstatement, or intent to evade is established, and limitation for extended recovery depends on the relevant period and departmental knowledge.

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