Rule 26 penalty for fraudulent cenvatable invoices upheld, but reduced because the quantum was disproportionate to the role proved.

Penalty under Rule 26 was sustained where the person actively assisted fraudulent availment of credit through cenvatable invoices without movement of goods, including procuring invoices at a premium and facilitating passing of credit through his own firms. The tribunal held that this conduct went beyond mere invoice issuance, making decisions on cases involving only paper transactions inapplicable. However, the penalty was found disproportionate to the proved role and circumstances, so the quantum was reduced while liability to penalty remained intact.

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Issues: Whether penalty under Rule 26 was sustainable for issuing and procuring cenvatable invoices without physical movement of goods, and whether the penalty amount required reduction.

Analysis: The appellant was found to have played a role beyond merely issuing invoices through his own firms, including procuring invoices at a premium and assisting in the passing of credit without receipt of goods. On these facts, the conduct fell within the mischief addressed by the penal provision, and the reliance on decisions concerning mere invoice issuance without movement of goods was held inapplicable. At the same time, the extent of penalty was considered disproportionate in the circumstances.

Conclusion: Penalty under Rule 26 was upheld, but the quantum was reduced from Rs. 50,00,000 to Rs. 10,00,000.

Final Conclusion: The appellant succeeded only to the extent of obtaining substantial reduction in penalty, while the finding of liability to penalty was maintained.

Ratio Decidendi: Where a person actively assists in the fraudulent availment of credit through cenvatable invoices without movement of goods, penalty is sustainable, though the quantum must remain proportionate to the role and circumstances proved.

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