2008 (5) TMI 216

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....ginal authority imposed a penalty of Rs. 17,746/- on PML in terms of Rule 13 of Cenvat Credit Rules, 2002 (CCR). He demanded interest of Rs. 17,746/- as proposed in the show cause notice. In the impugned order, the Commissioner vacated the demand of interest as well as the penalty imposed on PML. He found that in view of the Apex Court's decision in Rashtriya Ispat Nigam Ltd. v. Commissioner [2003 (161) E.L.T. 285(T)] the settled position as regards the demand of interest and imposition of penalty when the duty not paid had been paid before the issue of show cause notice was that the penalty was not imposable and the demand of interest was not legal. He also found that in the case of M/s. Pooja Forge Ltd., v. CCE, Faridabad reported in 2004....

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....and emboldened unscrupulous assessees to indulge in activities contrary to law. Blanket protection could not be extended from penalty in cases where duty was paid before the issue of show cause notice. 3. The authorized representative of the respondents submits that the excess credit of above Rs. 1.89 lakhs was wrongly availed by PML owing to system error. Once the error came to their notice, the wrong credit was reversed even before the issue of show cause notice. In the light of the decision of the Apex Court in Rashtriya Ispat Nigam Ltd. case, they were not liable to pay any interest nor had incurred liability to penalty. It is submitted that the assessee pays duty of around Rs. Seven crores a year and utilizes Cenvat credit to the tu....

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....penalty imposed. In Bhiwani Textile Mills Ltd. v. CCE, New Delhi reported in 2003 (151) E.L.T. 365 (Tri.-Del.), it was held that mandatory penalty could not be imposed for wrong availment of Modvat credit. 5. The Apex Court in Rashtriya Ispat Nigam Ltd. case, upheld non-imposition of penalty and waiver of interest where the duty not paid was paid before issue of show cause notice. In the instant case, there is nothing on record to disbelieve the assessee's claim that the excess credit was taken owing to error. Penalty need not be imposed just because statute provides for the same. Penalty need be imposed only in cases of dishonest or contumacious conduct of the assessee in defiance of law. In Hindustan Steel Ltd. v. State of Orissa - 197....