Cenvat credit penalty not sustainable where the assessee's explanation is accepted and enhanced penalty ingredients are absent.

Penalty under Rule 15(2) of the Cenvat Credit Rules, 2004 read with Section 11AC of the Central Excise Act was held unwarranted where the assessee's explanation for the disputed Cenvat credit was found cogent and was not disproved in adjudication. The text notes that the credit was taken on an input used in manufacturing HSD, and that payment of duty on the finished product can amount to reversal of the input credit. On those facts, the stricter penal provision was not attracted and the Revenue's challenge failed.

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Issues: Whether penalty under Rule 15(2) of the Cenvat Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944 was warranted on the assessee for the disputed availment of Cenvat credit.

Analysis: The dispute related to Cenvat credit taken on the input used in the manufacture of HSD. The assessee's explanation was found to be cogent and not disproved in the adjudication proceedings. In the circumstances noticed, the case did not justify invocation of the stricter penal provision. The reasoning was consistent with the principle that payment of duty on the finished product can amount to reversal of the Cenvat credit taken on inputs.

Conclusion: Penalty under Rule 15(2) read with Section 11AC was not leviable and the Revenue's challenge failed.

Ratio Decidendi: Where the assessee's explanation is found acceptable and the facts do not establish the ingredients for enhanced penalty, penalty under Rule 15(2) of the Cenvat Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944 is not sustainable.

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