Bona fide mistaken CENVAT credit did not attract Section 11AC penalty absent fraud or suppression, with no substantial question of law.

Penalty under Section 11AC of the Central Excise Act was held inapplicable where CENVAT credit was taken through a bona fide mistake and the record did not show fraud, collusion, wilful misstatement, suppression of facts, or intent to evade duty. The Tribunal's factual finding that an employee misread the EPCG documents, and that the Department delayed the show cause notice despite knowledge of the facts, was accepted as not perverse. In a Section 35G appeal, such factual appreciation did not justify interference and no substantial question of law arose.

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Issues: Whether penalty under Section 11AC of the Central Excise Act, 1944 was rightly deleted on the ground that the wrongful availment of CENVAT credit was a bona fide mistake and whether any substantial question of law arose for interference.

Analysis: The availment of CENVAT credit without payment of countervailing duty was admitted. However, the record showed no allegation of fraud, collusion, wilful misstatement, or suppression of facts with intent to evade duty. The factual finding of the Tribunal was that the credit had been taken by an employee under a mistaken understanding of the EPCG documents, and the Department had delayed issuance of the show cause notice despite knowledge of the facts. In an appeal under Section 35G, interference with such factual appreciation was not warranted unless the finding was perverse.

Conclusion: The Tribunal was justified in holding that Section 11AC was not attracted on the facts found, and no substantial question of law arose for interference.

Ratio Decidendi: In the absence of fraud, collusion, wilful misstatement, suppression of facts, or intent to evade duty, a bona fide mistaken availment of credit, supported by factual findings not shown to be perverse, does not attract interference in a Section 35G appeal.

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