Cenvat credit classification dispute: penalty was not imposable where the input treatment changed only during adjudication.

Where Cenvat credit on thermo couple tips was initially taken as inputs and later treated as capital goods, the assessee had sufficient balance in the Cenvat account and the classification was changed only during adjudication; on those facts, the taking of credit did not justify penal action and penalty was held not imposable.

---

---

Issues: Whether penalty was imposable where Cenvat credit on thermo couple tips was initially taken as inputs and later treated as capital goods.

Analysis: The credit was declared as pertaining to inputs, the assessee had sufficient balance in the Cenvat account, and the treatment of the goods was altered only in the course of adjudication. On these facts, the taking of credit did not justify penal action.

Conclusion: Penalty was held to be not imposable and the assessee succeeded.

---