Prospective Cenvat credit amendment and bona fide belief justified deletion of penalty on similar facts

Notification No. 70/2003-C.E. (N.T.) was treated as prospective and not merely clarificatory, so the challenge to entitlement to avail balance Cenvat credit before 15 September 2003 was not entertained. On penalty, the assessee's conduct was found to be based on a bona fide belief, and no circumstances were shown to justify punitive action. The Tribunal was expected to follow the earlier comparable decision deleting penalty on similar facts. The penalty was therefore held unsustainable and was set aside in favour of the assessee.

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Issues: Whether penalty imposed for taking the balance Cenvat credit in the subsequent financial year was sustainable where the assessee acted under a bona fide belief and the relevant amendment was held to be prospective.

Analysis: The challenge on entitlement to avail the balance credit prior to 15 September 2003 was not entertained, as the amendment introduced by Notification No. 70/2003-C.E. (N.T.) was treated as prospective and not clarificatory. On the penalty question, the material showed that the assessee had acted on a bona fide belief, and no circumstance was shown to justify imposition of penalty. The Tribunal ought to have followed the approach taken in the earlier comparable decision deleting penalty on similar facts.

Conclusion: The penalty could not be sustained and was set aside in favour of the assessee.

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