Penalty liability requires statutory preconditions and cannot extend beyond the show cause notice or uninvolved parties.

Penalty under the Cenvat Credit Rules could not be sustained against a person who only acted as a mediator and did not avail credit, because liability attached to the person who actually took the credit. Penalty under the Central Excise Rules was also unsustainable where the persons were neither manufacturers nor exporters and no relevant contravention was established. Penalty under the Customs Act similarly failed because no import or export involvement or customs contravention was shown. Relief beyond the scope of the show cause notice was impermissible, so the Revenue could not obtain enlarged relief on appeal.

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Issues: (i) Whether penalty could be sustained under Rule 13(1) of the Cenvat Credit Rules, 2002 / Rule 15(1) of the Cenvat Credit Rules, 2004 against a person who only acted as a mediator and did not avail cenvat credit; (ii) Whether penalty was sustainable under Rule 27 of the Central Excise Rules, 2002 against persons who were neither manufacturers nor exporters; (iii) Whether penalty could be imposed under Section 117 of the Customs Act, 1962 when the appellants were not involved in import or export; (iv) Whether the Revenue could seek relief not arising from the show cause notice.

Issue (i): Whether penalty could be sustained under Rule 13(1) of the Cenvat Credit Rules, 2002 / Rule 15(1) of the Cenvat Credit Rules, 2004 against a person who only acted as a mediator and did not avail cenvat credit.

Analysis: Penalty under the cenvat credit provisions is attracted against the person who avails the credit. The record showed that the appellant had only acted as a mediator in arranging the fraudulent rebate and credit, and had not himself taken cenvat credit.

Conclusion: The penalty under Rule 13(1) of the Cenvat Credit Rules, 2002 / Rule 15(1) of the Cenvat Credit Rules, 2004 was not sustainable and was set aside.

Issue (ii): Whether penalty was sustainable under Rule 27 of the Central Excise Rules, 2002 against persons who were neither manufacturers nor exporters.

Analysis: Rule 27 is a general penalty provision for contravention of the Central Excise law. Since the appellants were neither manufacturers nor exporters, no relevant contravention of the Central Excise Act or Rules could be attributed to them on the facts found.

Conclusion: The penalty under Rule 27 of the Central Excise Rules, 2002 was not sustainable and was set aside.

Issue (iii): Whether penalty could be imposed under Section 117 of the Customs Act, 1962 when the appellants were not involved in import or export.

Analysis: Section 117 applies where there is contravention of the Customs law. As the appellants were not involved in import or export of goods, no customs contravention was established against them.

Conclusion: The penalty under Section 117 of the Customs Act, 1962 was not maintainable and was set aside.

Issue (iv): Whether the Revenue could seek relief not arising from the show cause notice.

Analysis: The relief sought in the Revenue appeal was not founded on the show cause notice. A demand or liability cannot be enlarged by review or by travelling beyond the scope of the notice.

Conclusion: The Revenue's appeal was not maintainable to that extent and was dismissed.

Final Conclusion: The penalties imposed on the appellants were set aside, and the Revenue's challenge to the common order failed.

Ratio Decidendi: Penalty under cenvat credit, excise penalty, or customs penalty cannot be sustained against a person unless the statutory preconditions for that provision are met, and relief cannot be granted beyond the scope of the show cause notice.

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