Dealer's penalties upheld for bogus invoices aiding Cenvat Credit fraud. Pre-2007 penalties valid sans specific provisions.

The High Court upheld penalties imposed on a dealer for issuing bogus invoices enabling manufacturers to avail Cenvat Credit without supplying goods. The Commissioner's decision to set aside penalties was overturned, citing that penalties could be levied even without specific provisions before 01.03.07 if the dealer was involved in selling goods liable to confiscation. The Revenue's appeals were allowed, and the Original Adjudicating Authority's orders were restored.

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Issues:
Allegations of issuing bogus invoices for Cenvat Credit without supplying goods, imposition of penalty under Rule 26 of Central Excise Rules, 2002 prior to 01.03.07.

Analysis:
The case involved the respondent, a second stage registered dealer accused of issuing invoices to manufacturers without actually selling any goods, enabling the manufacturers to avail Cenvat Credit without supply. The Cenvat Credit passed on was Rs. 56,971/- and 88,671/-. The Assistant Commissioner confirmed the Cenvat Credit demands and imposed penalties equal to the amount passed on. However, the Commissioner (Appeals) set aside the penalties citing the absence of specific provisions for penalty imposition before 01.03.07. The Revenue filed appeals against the Commissioner (Appeals) orders.

During the proceedings, the respondent did not appear, leading to an ex-parte decision. The Revenue argued that penalties could be imposed on registered dealers for issuing bogus invoices under Rule 25(i)(d) and 26 of Central Excise Rules, 2002 even before 01.03.07. The respondent had issued invoices without supplying goods, confirmed by statements from a first stage dealer. The Commissioner (Appeals) set aside penalties due to the lack of specific provisions before 01.03.07. However, referencing the Hon'ble Punjab & Haryana High Court judgment, it was noted that penalties could be levied even without Rule 26(2) if the dealer was involved in selling goods liable to confiscation.

Based on the High Court ruling, it was concluded that the penalties were justified. The impugned order setting aside penalties was deemed unsustainable, and the Original Adjudicating Authority's orders were restored. Consequently, the Revenue's appeals were allowed.

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