2016 (12) TMI 907 - AT - Central Excise

Tribunal rules penalties inapplicable without excisable goods involvement

The Tribunal held that penalties under Rule 209A were not applicable to the appellants as they were not involved in activities specified under the rule, ... Imposition of penalty u/r 209A of the Act - clandestine removal - forged cenvatable invoices - the appellants are involved in issuance of fake gate passes and on the basis of which the fraudulent modvat credit was passed on for such offence whether the appellants are liable for penalty under Rule 209A of the Rules? - Held that: - From the plain reading of the above Rule 209, the person can be liable for penalty only when he acquires possession of, or is in any way concerned in transporting, removing, depositing, keeping, concealing, selling or purchasing or in any other manner deals with, any excisable goods which he knows or has reason to believe are liable to confiscation under the Act or these Rues. In the facts of the present case fake gate passes were issued but no goods were supplied therefore the dealing of the goods, in particular excisable goods is not involved. The appellants have not involved in the act as mentioned under Rule 209A such as transporting, removing, depositing, keeping, concealing, etc. of any excisable goods which are liable for confiscation. Since no goods were involved the question of dealing with the goods and the confiscation thereof is not involved. Under Rule 209A penalty cannot be imposed on the appellant for the offence committed. We observe that in the new Central Excise Rules 2002, Rule 26 is pari materia to Rule 209A, when it was realized by the Government that offence of the similar nature of the present case are also occurring for extending the fraudulent benefit by way of fake documents, the legislators have conciously inserted Sub-rule (2) in Rule 26 to bring the present offence under the ambit of penal provision. Since the provision similar to Sub-Rule (2) of Rule 26 was neither existing in Rule 26(1) nor in Rule 209A of Central Excise Rules 1944, the provision of Sub-Rule (2) cannot be made applicable prior to 1.3.2007 when Sub-Rule (2) was inserted. The penalty imposed under Rule 209A on the appellants are not sustainable, therefore the penalties are set aside - appeal allowed - decided in favor of appellant. Issues involved:Whether the appellants are liable for penalty under Rule 209A of the Act.Analysis:1. The case involved the issuance of cenvatable invoices/certificates without supplying the material, based on alleged fake and forged gate passes for MS Scrap, leading to fraudulent modvat credit to another company. The penalty under Rule 209A of Central Excise Rules 1944 was imposed on the appellants for their involvement in the fraudulent activity.2. The appellant's counsel argued that since no excisable goods were involved, the penalty under Rule 209A cannot be imposed. They cited judgments from the Bombay High Court and previous tribunal decisions where penalties under Rule 209A were dropped for similar cases, emphasizing that the penalty should not be applicable in the absence of dealing with excisable goods.3. On the contrary, the Revenue's representative contended that penalties under Rule 209A should be imposed even when no goods are directly handled, as fraudulent benefits were extended through the issuance of invoices. They referred to judgments supporting the imposition of penalties under similar circumstances.4. The Tribunal analyzed Rule 209A, stating that penalties can only be imposed when dealing with excisable goods liable for confiscation. Since no goods were involved in the present case, the appellants were not engaged in activities mentioned under Rule 209A. The Tribunal highlighted the legislative amendment in Rule 26 of Central Excise Rules 2002 to cover similar offenses, indicating that Rule 209A did not apply to cases like the present one. They also considered conflicting judgments but followed the binding decisions of the Bombay High Court and previous tribunal rulings to set aside the penalties imposed on the appellants.5. Ultimately, the Tribunal concluded that the penalties under Rule 209A were not sustainable in the appellants' case, setting them aside and allowing the appeals. The decision was based on the interpretation of the law, previous judgments, and the absence of direct involvement with excisable goods leading to confiscation.This comprehensive analysis of the judgment provides a detailed overview of the legal issues, arguments presented by both sides, and the Tribunal's reasoning leading to the final decision.