Rule 26 penalty for invoice-only issuance was unsustainable for the pre-amendment period before goods-supply coverage began.

Penalty under Rule 26 of the Central Excise Rules, 2002, as it stood before 01.03.2007, could not be sustained merely because persons issued invoices without supplying goods. The rule, in that period, applied to dealings with excisable goods such as possession, transport, removal, deposit, concealment, sale or purchase of goods known to be liable to confiscation. The later specific coverage of invoice issuance without supply was introduced only from 01.03.2007, so it did not apply retrospectively to the earlier period. Penalties were therefore held unsustainable.

---

---

Issues: Whether penalty under Rule 26 of the Central Excise Rules, 2002 was sustainable against persons alleged only to have issued invoices without supplying goods during the relevant period prior to the amendment introducing such coverage.

Analysis: Rule 26, as it stood during the relevant period, applied to a person who acquired possession of, transported, removed, deposited, kept, concealed, sold, purchased, or otherwise dealt with excisable goods knowing them to be liable to confiscation. The allegation against the appellants was not that they dealt with excisable goods in that sense, but only that they issued invoices without accompanying supply of goods to enable inadmissible credit to be taken. The specific basis for penalising mere invoice issuance without supply of goods came into force only from 01.03.2007, and the period in dispute was earlier.

Conclusion: Penalty under Rule 26 was not imposable on the appellants for the relevant period, and the penalties were unsustainable.

Final Conclusion: The impugned order imposing penalties was set aside and the appeals succeeded with consequential relief.

Ratio Decidendi: Penalty under Rule 26 of the Central Excise Rules, 2002, as applicable before 01.03.2007, could not be imposed merely for issuing invoices without supply of goods unless the person was shown to have dealt with excisable goods in the manner contemplated by the rule.

---