Voluntary reversal of inadmissible CENVAT credit bars penalty for suppression, but interest remains payable until reversal.

Inadmissible CENVAT credit voluntarily reversed before the show-cause notice, after audit objection, did not establish suppression of facts or mala fide intent, so penalty based on the extended period was not sustainable and was set aside. Interest on the credit for the period of utilisation remained payable as a compensatory consequence until reversal.

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Issues: Whether penalty could be sustained on reversed CENVAT credit availed on services used for foundation, structures and allied civil works, and whether interest remained payable on the reversed amount.

Analysis: The credit was reversed by the assessee before issuance of the show-cause notice after the audit pointed out the inadmissibility. In such circumstances, the record did not establish deliberate suppression or mala fide intent to evade tax so as to justify invocation of the extended period for penalty. The Tribunal also noted that audit detection by itself does not establish suppression of facts. At the same time, interest on the amount for the period of utilization remained payable as a compensatory consequence until actual reversal/payment.

Conclusion: Penalty was not sustainable and was set aside, while interest on the reversed credit was upheld.

Final Conclusion: The assessee obtained relief from penal consequences, but the monetary liability to pay interest on the utilized credit was maintained.

Ratio Decidendi: Where inadmissible credit is voluntarily reversed before the show-cause notice after being pointed out in audit, penalty based on suppression and extended limitation is not justified, though interest remains payable for the period of utilization.

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