Wilful falsity in invoices must be proved for dealer penalties; suspicion and circumstantial evidence alone are not enough.

Penalty on a registered dealer for issuing invoices alleged to contain incorrect particulars requires proof that the entries were wilfully false and made with intent to facilitate inadmissible Modvat credit. Circumstantial material such as godown conditions, stock discrepancies, transport details, price variations and recorded statements was treated as insufficient where it only raised suspicion and did not establish a specific instance of impermissible credit being taken. The contrary view considered the same material adequate, but the majority held that the statutory ingredients were not proved and the confiscatory and penalty orders could not stand.

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Issues: Whether the penalties and confiscatory reliefs imposed on the dealer and its representative for issuance of allegedly fictitious invoices and alleged facilitation of Modvat credit were sustainable.

Analysis: The majority held that the department failed to establish the essential ingredients of the penal provision governing registered dealers, namely that wrong or incorrect particulars were wilfully entered in the invoices with intent to facilitate inadmissible credit. The evidence relied upon, including the condition of the godown, absence of handling facilities, stock discrepancies, transport particulars, price variations, and statements recorded during investigation, was treated as only raising suspicion and not proving the charge. It was also held that the investigation did not identify any specific instance of impermissible credit being taken under the invoices, and the circumstantial material was met by plausible explanations. The contrary view treated the circumstantial evidence and statements as sufficient to sustain the findings and the penalties.

Conclusion: The penalties were not justified on the evidence and the appeals were allowed by majority.

Final Conclusion: The impugned orders were set aside and the appellants succeeded in the matter.

Ratio Decidendi: A penalty on a registered dealer for issuing invoices with incorrect particulars requires proof of wilful falsity and intent to facilitate inadmissible credit, and suspicion based on circumstantial material alone is insufficient without establishing those statutory ingredients.

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