Rule 26 penalty upheld for aiding inadmissible Cenvat credit, with penalty quantum reduced

Penalty under Rule 26 was attracted where evidence showed that a person associated with the appellant materially facilitated procurement and use of inputs and documents enabling another unit to avail inadmissible Cenvat credit. The Department's reliance on statements and surrounding circumstances was found sufficient to reject the contention that the employee acted only in an individual capacity. The penalty was nevertheless considered excessive on the facts, and the quantum was reduced.

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Issues: Whether the appellant was liable to penalty under Rule 26 for aiding and abetting another unit in availing inadmissible Cenvat credit, and if so, whether the penalty required reduction.

Analysis: The evidence on record, including the statements relied upon by the Department, was held sufficient to show that an employee associated with the appellant had played a material role in facilitating the procurement and utilisation of inputs and documents enabling the main noticee to take inadmissible Cenvat credit. The appellant's contention that the employee acted purely in an individual capacity was not accepted, having regard to the nature of the business and the surrounding circumstances. However, the penalty imposed was considered excessive in the facts of the case.

Conclusion: The appellant was held liable for penalty under Rule 26, but the quantum of penalty was reduced from Rs. 1,25,000/- to Rs. 50,000/-.

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