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of <h1>Tribunal sets aside penalty for improper Cenvat credit, citing rectification and revenue-neutral outcome.</h1> <h3>M/s K.L. Rathi Steels Ltd. Versus Commissioner of Customs & Central Excise, Noida</h3> M/s K.L. Rathi Steels Ltd. Versus Commissioner of Customs & Central Excise, Noida - TMI Issues:1. Availment of Cenvat credit without paying service providers.2. Availment of credit for services utilized by sister unit.3. Confirmation of demand, interest, and penalty by the Commissioner.4. Challenge to the imposition of penalty.Analysis:1. The appellant, engaged in manufacturing Tor Steel, availed Cenvat credit of Rs. 55,45,996/- without paying service providers, violating Rule 4(7) of Cenvat Credit Rules, 2004. Upon audit objection, the appellant acknowledged the error, reversed the credit, and paid interest. The Commissioner confirmed the reversal entries, interest, and imposed a penalty of Rs. 56,74,746/- under Rule 14 of Cenvat Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944.2. An additional amount of Rs. 1,28,750/- was availed by the appellant for services used by their sister unit. The appellant accepted the error, reversed the credit, and paid interest. The penalty was imposed concerning this amount as well.3. The appellant challenged only the penalty imposition, arguing that the premature availment of credit was rectified after payment to service providers. They contended that the credit remained unused during the period in question. The appellant's stance was that no mala fide intention existed to warrant a penalty.4. The Tribunal found that the appellant rectified the premature credit availment and reversed the amount with interest. The Tribunal noted that the appellant's sister unit could have utilized the credit, leading to a revenue-neutral situation. Considering the circumstances, the Tribunal held that no penalty was justified for both the premature credit availment and the amount related to the sister unit.5. Consequently, the Tribunal confirmed the demand and interest but set aside the penalty of Rs. 56,74,746/- imposed on the appellant, disposing of the appeal accordingly.
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