2015 (6) TMI 78 - AT - Central Excise

Tribunal Upholds Penalties for Bogus Invoices Issued by Companies, Requires Pre-Deposit for Appeal

The Tribunal dismissed stay petitions by M/s. Allianz Steel Ltd. and its Managing Director for non-prosecution, directing them to deposit dues. Penalties ... Waiver of pre deposit - Imposition of penalty - Issue of bogus invoices - Evasion of duty - penalty under Rule 26 - Whether penalty can be imposed on companies or firms under Rule 26 - Difference of opinion - Majority order - Held that:- W.e.f. 01/3/07 Rule 26 of Central Excise Rules, 2002 was amended and the main Rule 26 as mentioned become sub-Rule (1) and a sub-Rule (2) was added which provided that any person who issues any excise invoice without delivery of goods specified, therein or abets making such invoices or any issues other document or abets in making such documents on the basis of which the user of the said invoice or document is likely to take or has taken any ineligible benefit under the Act or the Rules made thereunder, like claiming of Cenvat credit under Cenvat Credit Rules, 2004 or refund, shall be liable to a penalty not exceeding the amount of such benefit or ₹ 5,000/- whichever is greater . Penalty under Rule 26, whether under sub-Rule (1) of Rule 26 or under sub-Rule (2) of Rule 26 can be imposed on a juristic person also i.e. on a company or a firm. Moreover, if a private limited company or public limited company or a partnership or a proprietorship firm as a registered dealer issues bogus invoices without supply of any material to enable another person avail the Cenvat credit, it would not be correct to say that in such cases the person who had issued the bogus invoices would not be liable for penalty under Rule 26 (2). - this is not the case where the requirement of pre-deposit of penalty for compliance with the provisions of Section 35F should be totally waived - Partial stay granted. Issues Involved:1. Dismissal of stay petitions for non-prosecution.2. Allegations of issuing invoices without actual movement of goods.3. Imposition of penalties under Rule 26 of the Central Excise Rules, 2002.4. Applicability of Rule 26 penalties on juristic persons.5. Requirement of pre-deposit for hearing appeals.Issue-Wise Detailed Analysis:1. Dismissal of Stay Petitions for Non-Prosecution:The stay petitions filed by M/s. Allianz Steel Ltd. and its Managing Director, Shri Vikram Agnihotri, were dismissed for non-prosecution. The Tribunal noted that despite repeated adjournments and notices, the appellants failed to appear. Consequently, the Tribunal directed both the applicants to deposit the entire dues within ten weeks and report compliance.2. Allegations of Issuing Invoices Without Actual Movement of Goods:The Revenue's investigation revealed that M/s. K.G. Ispat Pvt. Ltd. and M/s. Jain Ispat, registered dealers, were allegedly issuing invoices for waste and scrap without actual delivery to M/s. Allianz Steel Ltd., which availed Cenvat credit based on these invoices. The Tribunal considered evidence indicating that the vehicle numbers mentioned in the invoices were of non-transport vehicles, and some transporters denied transporting the goods.3. Imposition of Penalties Under Rule 26 of the Central Excise Rules, 2002:Penalties were imposed on M/s. Allianz Steel Ltd., M/s. K.G. Ispat Pvt. Ltd., and M/s. Jain Ispat under Rule 26 for their involvement in issuing bogus invoices. M/s. Allianz Steel Ltd. faced a penalty of Rs. 1,45,34,221/-, while M/s. K.G. Ispat Pvt. Ltd. and M/s. Jain Ispat were each penalized Rs. 10,00,000/-.4. Applicability of Rule 26 Penalties on Juristic Persons:The Tribunal examined whether penalties under Rule 26 could be imposed on juristic persons such as companies or firms. The Member (Judicial) relied on the Tribunal's decisions in Woodmen Industries vs. CCE Patna and Steel Tubes of India Ltd. vs. CCE Indore, which held that Rule 26 applies only to natural persons. However, the Member (Technical) disagreed, citing the Supreme Court's decision in Madhumilan Syntex Ltd. vs. Union of India, which recognized corporate criminal liability. The majority view concluded that penalties under Rule 26 could be imposed on juristic persons.5. Requirement of Pre-Deposit for Hearing Appeals:The Tribunal was divided on whether M/s. K.G. Ispat Pvt. Ltd. and M/s. Jain Ispat should be required to make a pre-deposit for their appeals. The Member (Judicial) favored waiving the pre-deposit based on the prima facie case and previous judgments. However, the Member (Technical) argued for a pre-deposit, considering the evidence and legal precedents. The majority decision required M/s. K.G. Ispat Pvt. Ltd. and M/s. Jain Ispat to deposit 50% of the penalty as a condition for hearing their appeals.Final Stay Order:As per the majority order, the stay petitions filed by M/s. Allianz Steel Ltd. and Shri Vikram Agnihotri were dismissed for non-prosecution, and both were directed to deposit the entire dues. M/s. K.G. Ispat Pvt. Ltd. and M/s. Jain Ispat were directed to deposit 50% of the penalties imposed on them within ten weeks from the date of the order for their appeals to be heard.