2018 (5) TMI 1043 - AT - Central Excise

CENVAT credit - input service distribution - excess credit which was distributed by their I-lead Office - penalty - Held that - there is absence of malafide intention on the part of the respondent in distributing the CENVAT credit as input service distributor and mens rea does not stand established in the present case. Penalties - Held that - if the CENVAT Credit is passed on as are ISD and that there was no evidence to show that it was done in malafide intention, the first appellate authority was correct in setting aside the penalties imposed by the adjudicating authority. Appeal dismissed - decided against Revenue.

Summary

Issues:
Appeal against setting aside penalty imposed by adjudicating authority for availing excess credit as an input service distributor without malafide intention.

Analysis:
The appeal before the Appellate Tribunal CESTAT MUMBAI challenged the order-in-appeal that set aside the penalty imposed by the adjudicating authority. The Revenue contended that the equal amount of penalty should not have been annulled by the first appellate authority. The Revenue argued that the respondent had availed excess credit distributed by their I-lead Office, which was not eligible, indicating an intention to use ineligible CENVAT credit. The Revenue cited judgments of the Hon'ble Apex Court to support the imposition of equivalent penalties for short payment or non-payment of duty. However, the first appellate authority found no malafide intention on the part of the respondent in distributing the CENVAT credit as an input service distributor. The factual finding of absence of mens rea was not contested by the Revenue in their grounds of appeal. The Appellate Tribunal noted that if the CENVAT Credit was passed on as an ISD without evidence of malafide intention, the first appellate authority was correct in setting aside the penalties imposed by the adjudicating authority.

The Appellate Tribunal, upon perusal of the impugned order and considering the arguments presented, found that the first appellate authority had correctly assessed the situation. The Tribunal emphasized that the absence of malafide intention in distributing the CENVAT credit was a crucial factor. The Tribunal highlighted that the Revenue's reliance on various decisions of the Hon'ble Apex Court regarding the imposition of equivalent penalties did not address the specific factual finding of lack of mens rea in this case. Consequently, the Tribunal concluded that the impugned order was appropriate, and the appeal lacked merit, leading to its rejection. Additionally, the Cross Objection was also disposed of in line with the rejection of the appeal.

Therefore, the Appellate Tribunal upheld the decision of the first appellate authority to set aside the penalties imposed by the adjudicating authority, emphasizing the importance of establishing malafide intention in such cases. The Tribunal's analysis focused on the specific factual findings and legal principles relevant to the imposition of penalties for availing excess credit as an input service distributor.