1. In this appeal filed by the assessee, the short question which arises for consideration is whether, under Rule 15(4) of the CENVAT Credit Rules, 2004, they are liable to be penalized on the facts of this case. The appellant has a manufacturing unit (Unit-I) at Isnapur and a service providing unit (Unit-II) at Bhadrachalam. During the period from April 2007 to April 2008, Unit-I took CENVAT credit on certain input services totalling to Rs. 4,98,899/- though it was not eligible to do so. This credit was, in fact, meant for Unit-II (provider of output service). The irregular availment of CENVAT credit by Unit-I was noticed by the Department in October 2008, whereupon the credit was reversed forthwith on 16-10-2008. Later on, interest was paid on 1-2-2010. Meanwhile, show-cause notice dated 21-4-2009 was issued by the Department requiring the appellant (Unit-I) to show-cause as to why

(a) an amount of Rs. 4,98,899/- being CENVAT credit irregularly taken on invoices pertaining to other unit should not be recovered under Rule 14 of CENVAT Credit Rules read with proviso to Section 11A of Central Excise Act, 1944 and the credit reversed amount to Rs. 4,98,899/- should not be adjusted towards the amount demanded.

(b) interest under Rule 14 of CENVAT Credit Rules, 2004 read with Section 11AB of the Central Excise Act, 1944 on (a) above should not be paid by them.

(c) penalty under Rule 15 of CENVAT Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944 should not be imposed on them.

2. The above proposals were contested by the party. In adjudication of the dispute, the original authority confirmed the demand and appropriated the payment of Rs. 4,98,899/- towards such demand. It also confirmed the demand of interest on duty. It also imposed a penalty of Rs. 2000/- on the party under Rule 15(3) of the CENVAT Credit Rules, 2004. The interest and penalty demanded by the adjudicating authority were paid up by the assessee. The non-imposition of penalty under sub-rule (4) of Rule 15 of the CENVAT Credit Rules, 2004 read with Section 78 of the Finance Act, 1994 by the adjudicating authority was reviewed in the Department and accordingly an appeal preferred to the Commissioner (Appeals). The learned Commissioner (Appeals) allowed that appeal by setting aside the penalty of Rs. 2000/- imposed under Rule 15(3) and imposing penalty of Rs. 4,98,899/- under Rule 15(4) on the assessee. This higher penalty is under challenge in the present appeal of the assessee.

3. Heard both sides. The learned counsel for the appellant submits that no ground for imposing penalty under Rule 15(4) was alleged in the show-cause notice. Both the provisions have been invoked against the assessee by the lower appellate authority in violation of the principles of natural justice inasmuch as they were not put to notice of any such proposal. The learned counsel has relied on the following decisions :—

1. CCE v. Thermax Ltd. 2010 (254) ELT 111 (Tri.-Mum.)

2. Lanco Industries Ltd. v. CCE 2011 (265) ELT 118 (Tri.-Bang.)

3. CCE v. BHEL 2012 (280) ELT 433 (Tri.-Delhi)

4. Learned Additional Commissioner (AR) refers to the show-cause notice and submits that, if the averments/allegations contained in paragraphs 2, 5 and 6 are read together, the show-cause notice will be found to have set up a case for imposing penalty on the party under sub-rule (4) of Rule 15. It is argued that such penalty cannot be resisted by the appellant by mere reason of non-mentioning of sub-rule (4) ibid or of Section 78 of the Finance Act, 1994 in the show-cause notice. The wrong mention of Section 11AC of the Central Excise Act is also not fatal to the Revenue. It is the further submission of the learned Additional Commissioner (AR) that, for the purpose of invoking the extended period of limitation, the show-cause notice clearly alleged against the assessee contravention of rules with intention to evade payment of duty. As the demand confirmed against the appellant by the original au