2014 (6) TMI 823 - AT - Central Excise

Adjudicating authority's penalty overturned due to lack of evidence

SHRI KASHINATH DAS (PROP SHIV TRADING CO) Versus COMMISSIONER OF CENTRAL EXCISE

The Tribunal set aside the penalty imposed on the appellant, citing lack of categorical findings and reliance on assumptions by the adjudicating ... CENVAT Credit - penalty on dealer - Fraudulent premises - Fake transaction - Fake invoices - Held that:- There are no categorical findings against the appellant so as to prove the charges as alleged in the show-cause notice inspite of there being names available of the alleged supplier in the invoices from whom the appellant allegedly purchased, no enquiry appears to have been done. Further, it is seen that the appellant is situated in Mumbai, whereas the invoices recovered from M/s Accelerated Synthetics Pvt. Ltd. allegedly issued by the appellant are printed by one Ambaji Stationery, Surat. No enquiry has been made with the printer as to who got the stationery printed. Further, the appellant had stated that he had obtained the registration under Central Excise on being inspired by one Chandubhai Patel of Surat, who has also admitted in his statement before the Revenue authorities that he had also registered one firm at Surat with the Excise Department in similar name of ‘Shiv Trading Company'. Chandubhai Patel has been found to be involved in the issue of bogus CENVAT invoices in other names also. It appears that the said Chandubhai Patel has been instrumental in the mischief by using the name of the appellant without his knowledge. Moreover, it is found that the adjudicating authority has imposed penalty without any categorical finding against the appellant. Rather the penalty is imposed on the basis of assumption and presumption which have no legs to stand - Decided in favour of appellant. Issues Involved:1. Validity of penalty imposed under Rule 26(2) of Central Excise Rules, 2002.2. Alleged issuance of fake/bogus invoices by the appellant.3. Appellant's denial of issuing invoices and the authenticity of signatures on the invoices.4. Investigation and findings by the Revenue authorities.5. Applicability of Rule 26(2) for transactions prior to 01.03.2007.Issue-wise Detailed Analysis:1. Validity of Penalty Imposed Under Rule 26(2) of Central Excise Rules, 2002:The appellant contested the penalty imposed under Rule 26(2) of the Central Excise Rules, 2002, arguing that the rule was not applicable to transactions prior to 01.03.2007. The Tribunal noted that the Commissioner (Appeals) and the adjudicating authority did not provide categorical findings against the appellant to substantiate the charges. The Tribunal also referenced the decision in the case of M/s Ispat Industries Ltd. Vs. Commissioner of Central Excise, Aurangabad, which held that Rule 26(2) is not applicable to matters before 01.03.2007.2. Alleged Issuance of Fake/Bogus Invoices by the Appellant:The Revenue alleged that the appellant issued fake invoices to facilitate others in availing illegitimate CENVAT Credit. The investigation revealed that the appellant's firm, M/s Shiv Trading Company, was registered with a fictitious address and no business transactions occurred during the registration period. The appellant denied issuing any invoices and claimed that the signatures on the invoices were forged.3. Appellant's Denial of Issuing Invoices and the Authenticity of Signatures on the Invoices:The appellant consistently denied issuing the invoices and stated that the signatures on the invoices were not his. The Tribunal found that the adjudicating authority imposed the penalty based on assumptions and presumptions without concrete evidence. The Tribunal noted that the appellant's denial of the signatures was not adequately addressed by the Revenue.4. Investigation and Findings by the Revenue Authorities:The Revenue's investigation revealed discrepancies, such as the use of a fictitious address for registration and the absence of business transactions in the appellant's bank account. However, the Tribunal observed that the investigation lacked thoroughness, particularly in tracing the origin of the invoices and the involvement of other individuals like Chandubhai Patel, who admitted to similar fraudulent activities.5. Applicability of Rule 26(2) for Transactions Prior to 01.03.2007:The Tribunal highlighted that the penalty under Rule 26(2) could not be imposed for transactions before 01.03.2007, aligning with the precedent set in Vee Kay Enterprises Vs. CCE. The Tribunal concluded that the penalty was imposed without proper legal basis and lacked substantial evidence.Conclusion:The Tribunal set aside the penalty imposed on the appellant, citing the lack of categorical findings and reliance on assumptions by the adjudicating authority. The appeal was allowed with consequential relief, emphasizing the need for concrete evidence and proper legal application in imposing penalties.