Proforma credit reversal and departmental awareness defeated demand, penalty and confiscation where no surviving evasion was shown.

Prompt reversal of disputed proforma credit, coupled with the department's prior awareness of the transactions through assessed returns, meant that no surviving demand was made out on the facts. The Tribunal accepted the assessee's bona fide conduct and treated the balance credit as having lapsed, holding that the record did not show serious evasion justifying penalty or confiscation of land, building, plant and machinery. The demand was not sustained and the penal consequences were found unwarranted, with relief granted to the assessee.

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Issues: Whether the balance proforma credit in the assessee's account had lapsed and whether the demand, penalty and confiscation order could be sustained.

Analysis: The assessee had availed proforma credit in the regular course and the department was aware of the transactions through assessed returns. The disputed credit was reversed on the department's instructions, and the finding of wrong availment of credit was not seriously disputed. The Tribunal treated the balance credit as having lapsed on the facts of the case and accepted the assessee's bona fide conduct, holding that the matter did not disclose any serious evasion warranting penal action or confiscation of land, building, plant and machinery.

Conclusion: The demand did not survive, and the penalty and confiscation were not justified. The issue was decided in favour of the assessee.

Final Conclusion: The appeal succeeded with consequential relief, and the impugned demand and penal consequences were set aside.

Ratio Decidendi: Where disputed credit is reversed promptly, the department is already aware of the relevant transactions, and no surviving demand is made out, penal consequences and confiscation are not warranted.

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