Reversal made with interest whether penalty @ 15% is to be paid.

[samiuddin ansari]

Sir,

My friend is having one manufacturing unit. Audit team of the Central Excise department conducted audit and raised some observations related to cenvat credit availment on Inputs and utilisation thereof. On being agreed, he has made reversal of Cenvat credit availed and utilised of Inputs with interest. However, the Audit team emphasised to made reversal with interest and penalty. I would like to know as to whether he has to made reversal alongwith with interest and penalty, however, he has not suppressed the fact, but due to oversight by the accountant of the unit. The same was availed and utilised which was infact not admissible to them. I seek your valuable advise and guidance in to the matter as to whether penalty is required to be paid in such case or otherwise.

Thanks with regard,

(Samiuddin Ansari)

AI Summary

Manufacturing Unit Faces Penalty for Improper Cenvat Credit; Rule 15 and Section 11A Referenced for Clarification A manufacturing unit was audited by the Central Excise department, which identified improper availing and utilization of Cenvat credit on inputs. The unit reversed the credit with interest but was advised by the audit team to include a penalty. The unit's representative argued that the error was an oversight, not suppression, and sought clarification on whether a penalty was necessary. Responses indicated that penalties apply unless the reversal was done voluntarily before audit detection. Legal provisions such as Rule 15 of the Cenvat Credit Rules and Section 11A of the Central Excise Act were referenced, suggesting that proving bona fide could potentially avoid penalties.