Reversal of wrongly availed Cenvat credit and delayed notice defeated demand, interest and penalties on limitation grounds

Where an assessee had wrongly availed Cenvat credit but reversed it and informed the department, the article notes that the demand was treated as time-barred because the show-cause notice was issued beyond one year. It also records that, in the absence of mala fide intention, penalties were found unsustainable on the facts. The discussion therefore concludes that the demand, interest and penalties were not sustainable, and the revenue's appeal was rejected.

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Issues: Whether the demand, interest and penalties were sustainable when the assessee had reversed the wrongly availed Cenvat credit and informed the department, and whether the show-cause notice was barred by limitation.

Analysis: The assessee had availed abatement under the relevant service tax notification subject to the condition that no input credit was taken. On noticing that credit had been wrongly availed after the amendment notification, the assessee reversed the credit and intimated the department. The show-cause notice was issued more than one year later. In these circumstances, the demand was held to be barred by limitation. The absence of mala fide intention was also noted, and the case for penalty was found unsustainable on the facts.

Conclusion: The demand, interest and penalties were not sustainable, and the revenue's appeal was rejected.

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