Tribunal confirms penalty for Mr. Tibrewal in fraudulent Cenvat credit case, sets aside penalty for Mr. Pansari

The Tribunal confirmed the penalty against Mr. Sajjan Mohan Tibrewal for his involvement in fraudulent activities related to availing ineligible Cenvat credit, supported by corroborated statements. However, the penalty against Mr. Pankaj Hari Pansari was set aside due to lack of evidence proving his knowledge or motive beyond reasonable doubt.

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Issues Involved:
1. Whether the learned commissioner is justified in confirming the penalty on the appellants under Rule 26 of the Central Excise Rules, 2002.

Summary:

Issue 1: Confirmation of Penalty under Rule 26

The appeals were filed by brokers challenging the order dated 10.10.2012 by the Commissioner, which confirmed the demand raised in the show cause notice against M/s. Surabhi Corporation for availing ineligible Cenvat credit. The Commissioner also imposed a separate penalty on the brokers under Rule 26 of the Central Excise Rules, 2002.

Facts and Allegations:
- Investigation revealed that M/s. Surabhi Corporation availed Cenvat Credit of Rs.1,67,84,392/- fraudulently, without any manufacturing activity or removal of excisable goods, and passed on ineligible Cenvat credit to their customers.
- The brokers were involved in procuring polyester yarn in the name of the assessee and selling it in the open market, while supplying only invoices to the assessee, enabling them to avail ineligible Cenvat credit.

Arguments by Appellants:
- The appellants argued that they did not physically deal with the yarn and thus were not liable for penalty under Rule 26, which applies only when excisable goods are physically dealt with.
- They relied on the decision of the Larger Bench of the Tribunal in Steel Tubes of India Ltd. vs. CCE, Indore.
- The appellants claimed that their statements were recorded under duress and coercion.

Arguments by Revenue:
- The Revenue argued that the brokers played a pivotal role in diverting polyester yarn and making invoices available to the assessee, thereby abetting the fraudulent availment of input credit.
- They supported their arguments with decisions from the Tribunal in similar cases.

Tribunal's Analysis:
- The Tribunal examined Rule 26, which penalizes any person who issues or abets in making an excise duty invoice without delivery of goods or any document enabling ineligible benefits under the Act.
- The Tribunal found that the brokers managed to procure raw materials and supply invoices without goods, enabling the assessee to avail ineligible Cenvat credit.
- The Tribunal considered the statements recorded under Section 14 of the Central Excise Act, 1944, which corroborated the involvement of the brokers.

Decision:
- The Tribunal confirmed the penalty against Mr. Sajjan Mohan Tibrewal, finding his involvement in the fraud proven beyond doubt through corroborated statements and retraction deemed as an afterthought.
- The Tribunal set aside the penalty against Mr. Pankaj Hari Pansari, concluding that while he was negligent, no knowledge or motive could be attributed to him, and the department failed to make a case against him beyond reasonable doubt.

Conclusion:
- The appeal of Mr. Sajjan Mohan Tibrewal was dismissed, confirming the penalty.
- The appeal of Mr. Pankaj Hari Pansari was allowed, setting aside the penalty.

Pronounced in open Court on 12.05.2023.

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