2017 (12) TMI 540 - AT - Central Excise

Tribunal overturns penalties on Daga Trading Co. Lack of evidence in fraudulent transactions.

M/s. Daga Trading Co. (P) Ltd., Shri Ramesh Kumar Daga Versus Commissioner of Central Excise, Delhi I

The Tribunal overturned the penalties imposed under Rule 25 and Rule 26 of Central Excise Rules, 2002 on Daga Trading Company and its Director. The ... Penalty - only case of Revenue is that M/s. Sanmati Steel Pvt. Ltd. as per the specifications of railway for manufacture of ERC were required to use a particular grede of rounds wherein it appeared that other than the said particular grade of rounds, they have also purchased some other rounds from the appellant - whether the learned Commissioner (Appeals) have rightly retained the penalty of Rupees One lakh imposed u/r 25 of CER, 2002 on Daga Trading Company and ₹ 50,000/- as penalty u/r 26 of CER, 2002. on its Director Shri Ramesh Kumar Daga? - Held that: - the whole case of Revenue was made on the presumption that M/s. Sanmati Steel Pvt. Ltd. was requiring a particular grade of rounds as per requirement of its buyer – Railways. As the appellants herein have sold them rounds, which also includes some other grade of rounds, the whole transaction is presumed fictitious and accordingly penalty are being imposed on the appellants. Penalty on Director U/R 26 - Held that: - Although it has been admitted by the Director of M/s. Sanmati Steel Pvt. Ltd. Mr Vinod Kumar Jain that he have indulged in procuring other goods other than specified by Railways from Daga Trading Company but it is not the case of the Director of M/s. Sanmati Steel Pvt. Ltd. that they have not received goods from M/s. Daga Trading Company - the allegation against the appellants do not stand established and thus no elements of penalty are established, under the provisions of Rule 25 of Rule 26 against these appellants. Appeal allowed - decided in favor of appellant. Issues involved:Whether the penalty imposed under Rule 25 of Central Excise Rules, 2002 on Daga Trading Company and its Director Shri Ramesh Kumar Daga was rightly retained by the learned Commissioner (Appeals).Analysis:The case revolved around the alleged fraudulent purchase of excess raw material by M/s. Sanmati Steel Pvt. Ltd., a manufacturer of 'Elastic Rail Clips' (ERC), from Daga Trading Company and others. The investigation revealed discrepancies in the procurement and invoicing practices, leading to the imposition of penalties under Rule 25 of Central Excise Rules, 2002. The show cause notice detailed the transactions, statements of involved parties, and discrepancies in the description of goods in invoices. The adjudication confirmed the demand against M/s. Sanmati Steel Pvt. Ltd. along with penalties, including on Daga Trading Company and its Director.The appeals challenged the findings, arguing that the Revenue's case was based on presumptions and assumptions. It was contended that proper records were maintained, goods were dispatched with invoices, and no clandestine dealings occurred. The appellants denied any wrongdoing and highlighted the lack of evidence supporting the penalties imposed. The defense emphasized that no goods were sold without purchase or invoices issued without dispatching goods, questioning the basis for the penalties under Rule 25 and Rule 26 of Central Excise Rules, 2002.Upon review, the Tribunal found the Revenue's case hinged on presumptions regarding the specific grade of rounds required by M/s. Sanmati Steel Pvt. Ltd. for ERC manufacturing. The Tribunal noted the absence of evidence showing non-delivery of goods or issuance of excisable invoices without dispatching goods. Despite admissions of procuring rounds other than specified by Railways, there was no proof of non-receipt of goods by M/s. Sanmati Steel Pvt. Ltd. The Tribunal concluded that the allegations against the appellants were not substantiated, leading to the setting aside of the penalties under Rule 25 and Rule 26. The decision favored the appellants, granting them consequential benefits in accordance with the law.In summary, the judgment analyzed the factual background, legal provisions, investigations, adjudication, and arguments presented by the appellants and the Revenue. The Tribunal's decision centered on the lack of concrete evidence supporting the penalties imposed, ultimately ruling in favor of the appellants and overturning the penalties under Rule 25 and Rule 26 of Central Excise Rules, 2002.