Penalty for passing ineligible credit set aside under Central Excise Rules - Appellant granted relief

The Tribunal set aside the penalty imposed on the Appellant for passing ineligible credit to a recipient under Rule 26(2) of the Central Excise Rules, 2002. The Tribunal found that all transactions were duly disclosed, excise duty was paid to the government, and there was no evidence of connivance between the Appellant and the recipient. Consequently, the demand for penalty was dismissed, and consequential relief was granted to the Appellant.

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Issues Involved:
The imposition of penalty under Rule 26(2) of the Central Excise Rules, 2002.

Summary:

Issue 1: Imposition of Penalty under Rule 26(2) of the Central Excise Rules, 2002

The appeal was filed challenging the penalty imposed on the Appellant for passing ineligible credit to a recipient. The Appellant was engaged in clearing specific goods to Tata International Ltd. following the prescribed procedure. The department alleged that the Appellant paid excise duty at a higher rate than applicable, leading to passing of ineligible credit to the recipient. The show cause notice was issued to impose a penalty on the Appellant, which was confirmed by lower authorities.

The Tribunal examined whether the Appellant could be penalized under Rule 26(2) of the Central Excise Rules, 2002 when the duty of an equivalent amount was paid to the government and all transactions were duly disclosed in ER 1 returns. Rule 26(2) pertains to situations where ineligible benefits are passed without the supply of goods. In this case, all transactions were recorded and disclosed to the department, with no allegation of invoices issued without the supply of goods. The Tribunal found no evidence of connivance between the Appellant and the recipient in the transactions.

Therefore, the Tribunal set aside the demand for penalty and provided consequential relief to the Appellant.

(Operative part of the order was pronounced in the open Court.)

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