Cenvat credit penalty not sustained where recipient lacked knowledge of supplier's error and no culpable intent was proved.

Penalty for excess Cenvat credit was held unsustainable where the recipient had no proved knowledge that the supplier, a 100% export-oriented unit, had charged duty at the domestic tariff area rate. The Tribunal's factual finding that the assessee lacked awareness or culpable intent justified giving benefit of doubt, and the High Court found no legal error in that appreciation of evidence. As the dispute turned on factual findings rather than any substantial question of law, the Revenue's challenge failed and the deletion of penalty was upheld.

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Issues: Whether penalty was sustainable for taking excess Cenvat credit when there was no evidence that the recipient had knowledge of the supplier's error and the recipient was entitled to benefit of doubt.

Analysis: The material on record showed that the supplier, a 100% export-oriented unit, had charged duty at a rate applicable to domestic tariff area clearances, and there was nothing to show that the recipient assessee knew that the supplies came from a 100% EOU. In the absence of proof of knowledge or intention on the part of the recipient, the Tribunal's view that the assessee could be given the benefit of doubt and that penalty was not justified did not suffer from legal error. The High Court also held that no substantial question of law arose from the Tribunal's factual appreciation and evidence-based findings.

Conclusion: Penalty could not be sustained and the Revenue's appeal failed.

Final Conclusion: The Tribunal's deletion of penalty was upheld on the ground that the recipient's conduct did not warrant penal consequences in the absence of proven knowledge or intent.

Ratio Decidendi: Penalty for wrongful availment of Cenvat credit is not warranted where the recipient lacks knowledge of the supplier's mistake and the finding rests on factual appreciation showing no culpable intent.

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