Eligiblity of Penalty on Volunteer Service Tax Credit Reversal

[Bhausaheb Gole]

Dear Experts:

We are manufacturer of exciseble goods. We have taken Service Tax credit on our Input services consumed in manufacturing process. after some days we knews that in internal audit some credit are inadmisible & we reversed without utilisation,, after in Audit EA2000 it has pointed out & Auditor raise the query to pay the penalty on reversal amount,

Please advice if is there any related case laws..

AI Summary

Reversal of input credit: whether pre utilisation reversal avoids interest and penalty depends on rule wording and guidance.
Whether interest or penalty attaches when input/service tax credit is reversed before utilisation depends on two operative considerations: (1) whether reversal before utilisation constitutes credit not availed so that neither interest nor penalty is triggered, as supported by a departmental circular and referenced judgments; and (2) whether the amended textual provisions and the statutory conditions for interest and penalty nonetheless bring the reversal within interest or penalty liability.