Appellants must pre-deposit 7.5% penalties under Section 35F Central Excise Act, 1944 for waiver pending appeal.

The judgment directed the appellants to deposit 7.5% of the imposed penalties as a pre-deposit in compliance with the amendment made under Section 35F of the Central Excise Act, 1944. Upon such compliance, the balance of the penalties would remain waived until the appeal was disposed of.

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Issues: Stay of operation of impugned order imposing penalties under Central Excise Rules, 2002.

Analysis:
The judgment deals with the issue of stay of the operation of an impugned order imposing penalties under Rules 26 and 27 of the Central Excise Rules, 2002 on the appellants. The brief facts of the case involve allegations against deemed manufacturers for utilizing CENVAT Credit based on fake invoices to defraud the exchequer. The investigation focused on transactions between M/s Singh Inc. and the appellants, M/s Varun Impex and M/s Ashirwad Fashion. The impugned order imposed penalties on the appellants under Rule 26 for their involvement in these transactions. The Commissioner found that although Varun Impex did not evade Central Excise duty, penalties under Rule 26 could still be imposed as the transactions were deemed fraudulent. The judgment also refers to an amendment to Rule 26 from 1.3.2007, which expanded the scope of penalties for issuing excise duty invoices without actual delivery of goods. Penalties were also imposed on other appellants based on similar findings.

The appellants argued that under the previous version of Rule 26, penalties could only be imposed when excisable goods were physically involved in the offense, which was not the case in their situation. They requested a stay on the recovery of penalties until the appeal was disposed of. On the other hand, the learned Additional Commissioner relied on the impugned order and requested the appellants to comply with the terms.

After considering the arguments from both sides, the judgment directed the appellants to deposit 7.5% of the imposed penalties as a pre-deposit in compliance with the amendment made under Section 35F of the Central Excise Act, 1944. Upon such compliance, the balance of the penalties would remain waived until the appeal was disposed of. The appellants were given a deadline for compliance, and the judgment was dictated and pronounced in court.

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