2011 (11) TMI 571 - AT - Central Excise

Penalty - Malafide intention of assessee - Held that - When the Mala fide of the respondent or far reaching consequences are not brought on record, order of the learned Commissioner (Appeals) granting relief to the respondent cannot be impeached. However, when there is no knowable breach of law on record, levy of penalty of Rs. 25,000/- was unwarranted since levy is not sanctioned by Rule 15 of Cenvat Credit Rules, 2004 in absence of intention to evade payment of duty or to make any wilful contravention of any provision of law - Decided against Revenue.

Summary

Issues Involved:
1. Transfer of amount from PLA to Cenvat credit account for service tax liability.
2. Validity of penalty imposed by the Commissioner (Appeals).

Transfer of Amount Issue:
The judgment revolves around the transfer of the impugned amount from the Respondent's PLA account to the Cenvat credit account for the discharge of service tax liability. The Revenue failed to establish any possible prejudice caused by this action. It was noted that the Respondent deposited the money into the treasury and no mala fide intent was proven. The Respondent's action was found to be in accordance with the Service Tax Rules, 2004, which allow credit arising from service tax payment to be utilized for discharging liabilities. The absence of any mala fide intent or breach of law led to the conclusion that the transfer was not improper.

Validity of Penalty Issue:
The Commissioner (Appeals) had imposed a penalty of Rs. 25,000 on the Respondent, which was contested by the Respondent in their cross-objection. The judgment highlighted that there was no evidence of mala fide conduct by the Respondent or any far-reaching consequences. The order granting relief to the Respondent was upheld, emphasizing that the penalty was unwarranted. It was noted that the penalty was not sanctioned by Rule 15 of the Cenvat Credit Rules, 2004, as there was no intention to evade duty payment or willful contravention of any law provision. Consequently, the Revenue's appeal failed, but the Respondent's Cross Objection succeeded, resulting in relief from the penalty imposed by the first appellate authority.

In conclusion, the judgment clarified the legality of the amount transfer for service tax liability and the validity of the penalty imposed, emphasizing the importance of establishing mala fide intent and adherence to relevant rules and provisions in such cases.