2019 (4) TMI 238 - AT - Central Excise

Tribunal Upholds Penalties for Fraudulent Rebate Claims; Appellant 1 Dismissed, Appellant 2 Penalty Reduced

The Tribunal upheld penalties imposed under Rule 26 of the Central Excise Rules, 2002, against appellants involved in fraudulent rebate claims using ... Imposition of penalty u/r 26 of the Central Excise Rules, 2002 - availment of credit u/r 12B of Central Excise Rules, 2002 - fake invoices without receiving the goods - Held that:- The case of revenue against the said appellant was on all four identical to the case of Appellant-1 and the quantum of penalty imposed on him was same as that imposed on present appellant. Tribunal has after consideration of all the issues dismissed the appeal in that case. Following the said order of tribunal and taking note of the fact that by their acts appellant has/ was in process of facilitating the fraudulent rebate in excess of ₹ 1,00,00,000/- we uphold the order of Commissioner against Appelant-1 and dismiss his appeal. Appellant -2 has knowingly or unknowingly became party to the conspiracy and fraud committed by Shri K K Gupta and his Muni Group of Companies. Accordingly we have no hesitation in holding that penalty under Rule 26 of Central Excise Rules, 2002 is justified - Commissioner has imposed a penalty of ₹ 1,00,00,000/- on Appellant-2, who is Group B Central Government Employee. The penalty imposed is his highly disproportionate to the means of the person on whom it has been imposed, might be equivalent to all his life earnings. In our view taking into account all the facts and the fact that Appellant-2 could have been the innocent victim of the conspiracy of Shri K K Gupta, we are of the view that ends of justice will be met if penalty amount on Appellant-2 is reduced to ₹ 10,00,000/-. Appeal allowed in part. Issues Involved:1. Imposition of penalty under Rule 26 of the Central Excise Rules, 2002.2. Allegations of fraudulent credit and rebate claims by merchant exporters.3. Denial of cross-examination and principles of natural justice.4. Role and penalty of a Superintendent of Central Excise in the conspiracy.Detailed Analysis:1. Imposition of Penalty under Rule 26 of the Central Excise Rules, 2002:The appeals were filed against the penalties imposed under Rule 26 of the Central Excise Rules, 2002, which penalizes any person involved in dealing with excisable goods liable for confiscation. The Tribunal upheld the penalties, citing the fraudulent activities of the appellants, who used invoices from Muni Group of Companies to claim rebates on goods that were never received or exported as per the invoices. It was established that the appellants dealt with goods and invoices fraudulently, making them liable for penalties under Rule 26.2. Allegations of Fraudulent Credit and Rebate Claims:The Muni Group of Companies issued invoices without actual clearance of goods, facilitating fraudulent rebate claims by merchant exporters. The appellants, including the merchant exporters, were found to have used these invoices to claim rebates on goods that were either locally procured or of inferior quality, without paying the actual duty. The Tribunal confirmed that the appellants were involved in fraudulent activities, as evidenced by the lack of transport documents and the flow of funds indicating bogus transactions.3. Denial of Cross-Examination and Principles of Natural Justice:Appellant 1 argued that the denial of cross-examination violated the principles of natural justice. However, the Tribunal held that the adjudicating authority has the discretion to reject cross-examination requests if deemed unnecessary, provided reasons are given. The Tribunal cited Supreme Court rulings, stating that in cases where the evidence is clear and confession binds the appellant, the denial of cross-examination does not violate natural justice.4. Role and Penalty of a Superintendent of Central Excise in the Conspiracy:Appellant 2, a Superintendent of Central Excise, was penalized for his role in certifying fraudulent transactions and duty payments without proper verification, thereby facilitating the fraudulent activities of the Muni Group. The Tribunal acknowledged his involvement in the conspiracy but reduced the penalty from Rs. 1,00,00,000/- to Rs. 10,00,000/-, considering it disproportionate to his means and potential innocence in the conspiracy.Conclusion:The Tribunal dismissed the appeal of Appellant 1, upholding the penalty for his involvement in fraudulent rebate claims. The appeal of Appellant 2 was partially allowed, with the penalty reduced to Rs. 10,00,000/-, acknowledging the excessive nature of the original penalty and his possible victimization in the conspiracy. The judgments emphasized the appellants' active participation in fraudulent activities and the justifiability of penalties under Rule 26.