CENVAT penalty not sustainable when wrongly availed credit is reversed with interest before notice and no intent to evade is shown.

Penalty under Rule 15 of the CENVAT Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944 is not sustainable where wrongly availed credit is reversed with interest before issuance of the show-cause notice and the record shows no suppression of facts with intent to evade duty. The assessee informed the Department that the credit had been taken by mistake, and the reversal was made immediately after the audit objection. In these circumstances, and following tribunal precedent, penalty was set aside.

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Issues: Whether penalty under Rule 15 of the CENVAT Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944 was sustainable when the wrongly availed credit was reversed with interest before issuance of the show-cause notice and there was no suppression of facts with intent to evade duty.

Analysis: The credit was reversed along with applicable interest immediately after the audit pointed out the irregularity and before the show-cause notice was issued. The assessee also informed the Department that the credit had been taken by mistake and that there was no intention to avail excess credit. In these circumstances, and following the cited tribunal precedent, where tax or duty is paid with interest before issuance of notice and no material shows suppression with intent to evade, penalty is not justified.

Conclusion: The penalty was unsustainable and was set aside in favour of the assessee.

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