Rule 26 penalty for fictitious invoices upheld, but reduced where the noticee's role was limited.

Penalty under Rule 26 of the Central Excise Rules, 2002 was sustained where the evidence showed issuance of invoices without actual supply of goods and participation in transactions facilitating wrongful CENVAT credit. The record indicated doubtful transport material, lack of basic infrastructure at the premises, and surrounding circumstances inconsistent with genuine cutting activity, supporting the finding of liability. However, the noticee's role was treated as limited, so the penalty was considered excessive in quantum. The Tribunal therefore upheld the penalty in principle but reduced it substantially from Rs.10,00,000 to Rs.1,00,000.

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Issues: Whether penalty under Rule 26 of the Central Excise Rules, 2002 was sustainable against a person alleged to have issued invoices without actual supply of goods and, if sustainable, whether the quantum of penalty required reduction.

Analysis: Rule 26 permits penalty where a person deals with excisable goods or issues invoices or documents knowing, or having reason to believe, that they facilitate confiscation or ineligible benefit, including wrongful CENVAT credit. The evidence relied upon indicated that the appellant's premises lacked adequate infrastructure and electricity for the alleged cutting activity, the vehicle records and transport evidence were doubtful, and the surrounding circumstances supported the conclusion that the transactions were not genuine and were meant to enable irregular credit. At the same time, the role attributed to the appellant was treated as limited, and the material on record was found sufficient to sustain liability but not to justify the full penalty imposed.

Conclusion: The penalty under Rule 26 was upheld, but the amount was reduced from Rs.10,00,000/- to Rs.1,00,000/-.

Final Conclusion: The appellant remained liable under Rule 26, but received substantial relief in the quantum of penalty.

Ratio Decidendi: Penalty under Rule 26 is sustainable where the evidence shows issuance of invoices or participation in transactions facilitating wrongful CENVAT credit without actual supply of goods, and the penalty may be moderated where the role of the noticee is limited.

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