Penalty for supplier's duty short-payment fails where recipient lacks knowledge of evasion and acts on supplementary invoices.

Penalty was held not to be leviable where the respondent had no knowledge, and no reason to know, that the supplier had short-paid duty with intent to evade. The authorities found that the respondent merely claimed credit on supplementary invoices issued by the supplier, and on those facts no culpable knowledge could be attributed to it. As the requisite knowledge element for penalty was absent, the penalty basis failed and the lower orders were upheld. The Revenue's challenge was rejected.

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Issues: Whether penalty was imposable on the respondent for alleged short payment of duty by the supplier and whether the respondent had knowledge or reason to know that the supplementary invoices were issued for evasion of duty.

Analysis: The lower authorities found that the respondent was not aware that the supplier had short-paid duty with intent to evade duty. The respondent had claimed credit on the supplementary invoices issued by the supplier, and on the facts no culpable knowledge could be attributed to it. In the absence of such knowledge, the basis for penalty was not made out.

Conclusion: No penalty was imposable on the respondent. The Revenue's appeal was rejected and the order of the lower authorities was upheld.

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