Bona fide Cenvat credit mistake and pre-notice reversal barred penalty absent suppression or intentional evasion.

Penalty was not leviable for wrong availment of Cenvat credit on construction-related services because the credit was reversed before the show cause notice and the assessee had acted under a bona fide misinterpretation of input service scope. Where the services related to repair and maintenance of the factory, two views were possible on admissibility and no suppression or deliberate evasion was established, penal action under Section 11AC of the Central Excise Act, 1944 and Rule 15(2) of the Cenvat Credit Rules, 2004 was not warranted.

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Issues: Whether penalty was leviable for wrong availment of Cenvat credit on construction-related services when the credit was reversed before issuance of the show cause notice and the assessee claimed bona fide belief.

Analysis: The dispute turned on whether the assessee's availment of credit attracted penalty under Section 11AC of the Central Excise Act, 1944 and Rule 15(2) of the Cenvat Credit Rules, 2004. The factual findings accepted that the credit had been reversed before the show cause notice and that the case involved a bona fide misinterpretation of the scope of input service under Rule 2(l) of the Cenvat Credit Rules, 2004. The earlier authority had also found that the services related to repair and maintenance of the factory and that two views were possible on admissibility. In these circumstances, the absence of proved suppression or deliberate wrongdoing meant that penal liability was not attracted.

Conclusion: Penalty was not leviable and the assessee succeeded on this issue.

Ratio Decidendi: Penalty under Section 11AC of the Central Excise Act, 1944 is not warranted where Cenvat credit is taken under a bona fide mistake, reversed before notice, and no suppression or intentional evasion is established.

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