Appeal successful: Penalty overturned for prompt reversal of irregular credit and interest payment.

The Tribunal allowed the appeal, setting aside the penalty imposed under Rule 15(2) of the Cenvat Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944. The appellant's prompt reversal of the irregular credit and payment of interest before the notice were crucial factors in the Tribunal's decision.

---

---

Issues: Disallowance and recovery of cenvat credit, imposition of penalty under Rule 15(2) of the Cenvat Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944.

Analysis:

1. Cenvat Credit Disallowance: The appellant, engaged in manufacturing various products, availed services like security services, professional fees, labor charges, etc., and paid service tax. A show cause notice was issued for disallowance and recovery of cenvat credit of Rs. 1,08,365 for the period 2011-2012. The adjudicating authority confirmed the demand, and the Commissioner upheld the order. The appellant reversed the alleged irregularly availed credit and paid interest before the notice. The Tribunal noted that the credit was adjusted before the notice, and the interest was paid, which was duly reflected in their returns. Thus, there was no dispute regarding the quantum of credit reversed by the appellant.

2. Imposition of Penalty: The main contention was the imposition of penalty under Rule 15(2) of the Cenvat Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944. The appellant argued that since the irregular credit was reversed promptly upon identification by the department, before the show cause notice, no penalty should be imposed. The Tribunal observed that while there were allegations of suppression, it was not explained how the intent to evade payment of Central Excise duty was established, especially considering the appellant's compliance with audits and availability of documents for inspection. Relying on judicial decisions, the Tribunal held that no penalty was warranted in this case and set it aside.

3. Decision: After considering the arguments and evidence, the Tribunal allowed the appeal, setting aside the penalty imposed under Rule 15(2) of the Cenvat Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944. The appellant's prompt reversal of the irregular credit and payment of interest before the notice played a crucial role in the Tribunal's decision.

---