2020 (2) TMI 1199 - AT - Central Excise

Tribunal overturns Rule 15 penalty, upholds Rule 26 penalty for issuing invoices without supplying goods.

Naresh Agrawal Versus C.C.E. & S.T. -Vadodara- II

The Tribunal set aside the penalty imposed under Rule 15 of Cenvat Credit Rules, 2004 but upheld the penalty under Rule 26 of Central Excise Rules, 2002 ... Imposition of penalty u/r 15 of Cenvat Credit Rules, 2004 and Rule 26 of Central Excise Rules, 2002 - CENVAT credit - bogus invoices - case of the department is that the appellant has issued bogus invoice and no goods were sold under those invoices to M/s Kothi Steel Ltd. - HELD THAT:- The penalty under Rule 15 can be imposed only on that person who takes or utilizes the Cenvat credit. If in any case, any manufacturer who is liable to pay duty on final product wrongly avails and utilizes the credit in respect of inputs, he is liable for penalty under Rule 15 - In the present case, the appellant has neither taken the credit, nor utilized the credit, whereas he has only issued a Cenvatable invoice to some other company M/s Kothi Steel Ltd. Therefore, the Rule 15 is not applicable in the present case. Hence, penalty imposed under Rule 15 of Cenvat Credit Rule, 2004 by the lower authorities is illegal and incorrect. Penalty imposed under Rule 26 of Central Excise Rules, 2002 - HELD THAT:- The same issue has been considered by the Hon’ble High Court of Punjab & Haryana in the case of M/S VEE KAY ENTERPRISES, FARIDABAD VERSUS COMMISSIONER OF CENTRAL EXCISE [2011 (3) TMI 133 - PUNJAB AND HARYANA HIGH COURT] which was followed by this Tribunal in the case of COMMISSIONER OF CENTRAL EXCISE AHMEDABAD VERSUS SHRI NAVNEET AGARWAL [2011 (8) TMI 250 - CESTAT, AHMEDABAD] wherein it was held that penalty under Rule 26 (2) is imposable on the person who has issued the invoices without supply of goods. The penalty under Rule 26 was rightly imposed on the appellant. Hence, the same is upheld - Penalty u/r 15 set aside - appeal allowed in part. Issues:- Imposition of penalty under Rule 15 of Cenvat Credit Rules, 2004 on the appellant.- Imposition of penalty under Rule 26 of Central Excise Rules, 2002 on the appellant.Analysis:Issue 1: Imposition of penalty under Rule 15 of Cenvat Credit Rules, 2004 on the appellant:The appellant, a registered dealer, was alleged to have issued bogus invoices to M/s Kothi Steel Ltd., leading to the availment of Cenvat Credit by the latter. However, it was argued that the penalty under Rule 15 can only be imposed on the person who takes or utilizes the Cenvat credit. Since the appellant neither took nor utilized the credit, the penalty under Rule 15 was deemed wrongly imposed. The Tribunal concurred, stating that Rule 15 applies to those who avail and utilize credit, not merely issue invoices. Consequently, the penalty under Rule 15 was set aside as it was deemed illegal and incorrect.Issue 2: Imposition of penalty under Rule 26 of Central Excise Rules, 2002 on the appellant:The appellant challenged the penalty imposed under Rule 26, citing a case precedent. However, the Revenue argued that the facts of the cited case differed significantly from the present case. The Tribunal noted that the Madras High Court judgment relied upon was not directly applicable due to factual disparities. Instead, the Tribunal referred to a decision by the High Court of Punjab & Haryana, which held that penalty under Rule 26 is applicable to individuals involved in issuing invoices without supplying goods. The Tribunal upheld the penalty under Rule 26, stating that the appellant was liable for penalty as they were concerned with selling goods liable to confiscation. The decision was based on the premise that a person issuing invoices without delivering goods cannot evade penalty. Therefore, the penalty under Rule 26 was deemed rightly imposed on the appellant, and the appeal was partly allowed in this regard.In conclusion, the Tribunal set aside the penalty imposed under Rule 15 of Cenvat Credit Rules, 2004 but upheld the penalty under Rule 26 of Central Excise Rules, 2002 on the appellant based on their involvement in issuing invoices without supplying goods. The judgment provided a detailed analysis of the legal provisions and case precedents to support its decision.