2017 (4) TMI 1298 - AT - Central Excise

Tribunal rules no penalty for invoices without supply due to lack of manufacturing activities

Commissioner of Central Excise, Chandigarh Versus Surya Ispat Udyog

Commissioner of Central Excise, Chandigarh Versus Surya Ispat Udyog - 2017 (358) E.L.T. 476 (Tri. - Chan.) Issues:Appeal against penalty dropped by Commissioner (Appeals) - Imposition of penalty under Rule 26 of Central Excise Rules, 2002 for issuance of invoices without actual supply of material.Analysis:The appeal before the Appellate Tribunal CESTAT CHANDIGARH was regarding the penalty imposed on the respondent, which was subsequently dropped by the Commissioner (Appeals). The Revenue contended that the respondent was availing Cenvat credit on inputs without actually engaging in manufacturing activities and was issuing invoices for finished goods without manufacturing them. It was found that the respondent did not have a manufacturing facility and was enabling others to avail inadmissible Cenvat credit through these invoices. The manufacturer buyers or dealers reversed the Cenvat credit on these invoices. However, the Commissioner (A) dropped the penalty, stating that since the respondent never dealt with the goods, penalty under Rule 26 of the Central Excise Rules, 2002 was not applicable during the relevant period.Upon hearing the arguments and examining the records, the Tribunal noted that there was no provision to impose a penalty on the respondent under Rule 25/26 of the Central Excise Rules, 2002 during the relevant period. The Commissioner (A) correctly observed that as no manufacturing activity took place and no excisable goods were manufactured or produced, the penalty provisions under Rule 13(2) of the Cenvat Credit Rules, 2002 and Rule 25(1)(b) of the Central Excise Rules, 2002 were not attracted. It was also pointed out that the penalty provision for facilitating others in taking credit or issuing invoices without actual supply of material was inserted later, w.e.f. 1-3-2007, and was not applicable during the relevant period.In agreement with the Commissioner (A), the Tribunal upheld the decision to drop the penalty on the respondent. The Tribunal found no infirmity in the impugned order and dismissed the appeal filed by the Revenue. The Tribunal concluded that as there was no provision for imposing a penalty for issuance of invoices without actual supply of material during the relevant period, the penalty was not imposable on the respondent under Rule 13(2) of the Cenvat Credit Rules, 2002 and Rule 25(1)(b) of the Central Excise Rules, 2002.