Pre-amendment penalty limits under Rule 26 did not cover fake invoices issued without delivery of goods.

Rule 26 of the Central Excise Rules, 2002, as it stood before insertion of sub-rule (2) on 1 March 2007, did not extend to issuance of fake invoices or abetment where no excisable goods were delivered or involved. The pre-amendment provision was confined to persons concerned with excisable goods liable to confiscation, so penal liability could not be fastened for invoice-based wrongful availment of Cenvat credit during the earlier period. The later amendment specifically brought such conduct within the rule, but it was not applicable retrospectively. Accordingly, the penalty under the unamended rule was unsustainable.

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Issues: Whether penalty could be imposed under Rule 26 of the Central Excise Rules, 2002 for issuance and abetment of fake invoices without delivery of goods during the period prior to insertion of sub-rule (2).

Analysis: The conduct in question related to issuance of invoices and allied documents for wrongful availment of Cenvat credit during 2003 to 2005. The unamended Rule 26 dealt with persons concerned with excisable goods liable to confiscation, whereas the specific inclusion of issuing invoices without delivery of goods and abetment in making such documents was introduced only by insertion of sub-rule (2) with effect from 1 March 2007. As the alleged contraventions occurred before that amendment and no physical excisable goods were involved, the pre-amendment rule did not cover such acts.

Conclusion: Penalty under the unamended Rule 26 was not sustainable and was rightly set aside.

Final Conclusion: The appeals succeeded and the penalties imposed on the appellants were annulled by modifying the impugned order accordingly.

Ratio Decidendi: Penal liability for issuance of fake invoices without delivery of goods could not be imposed under Rule 26 of the Central Excise Rules, 2002 for a period prior to the insertion of sub-rule (2), since the pre-amendment provision applied only to dealings with excisable goods liable to confiscation.

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