Regularisation of suo motu CENVAT credit for export rebate upheld, with demand dropped and penalty reduced to a token amount.

Suo motu availment of the balance export rebate as CENVAT credit was treated as a one-time procedural irregularity capable of regularisation, since the credit represented rebate due to the exporter and the Board's circular recognised the prevailing practice. The demand was therefore set aside, but the procedural lapse was found to justify only a nominal penalty, with the equal penalty replaced by a token penalty.

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Issues: Whether the assessee's suo motu taking of the balance export rebate as CENVAT credit could be regularised and whether the demand and equal penalty were sustainable.

Analysis: The credit represented the balance of export rebate due to the exporter. In view of the Board's circular recognising the prevailing practice and the need to encourage exporters, the taking of credit without a specific order was treated as a one-time irregularity capable of regularisation. The demand was therefore not sustained, but the procedural lapse was held to warrant only a nominal penalty.

Conclusion: The suo motu credit was regularised, the demand was set aside, and the penalty equal to the duty amount was replaced by a token penalty of Rs. 5,000.

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