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2014 (6) TMI 419 - HC - Central ExcisePenalties on respondents-dealers - facilitated others in taking fraudulent CENVAT - paper transactions without actual movement of goods - The party was a manufacturer on paper - Held that - This Court in Ashish Gupta and Vee Kay Enterprises s cases 2011 (3) TMI 133 - PUNJAB AND HARYANA HIGH COURT had held that Rule 26(2) of the Rules by virtue of which an assessee was held liable for penalty where invoices were issued without any movement of goods, was inserted by notification dated 1.3.2007 which was not applicable to alleged acts committed prior to the said date. Further, in view of the findings recorded by Commissioner (Appeals) to the effect that Rule 25(1) (b) of the Rules was not attracted to the facts of the present case, the aforesaid judgment does not advance the case of the revenue. However, the Commissioner (Appeals) and the Tribunal on facts deleted the penalty. Revenue has filed appeals where no penalty was imposed on persons who issued invoices without delivery of the goods prior to amendment of sub rule (2) of Rule 26 of the Central Excise Rules, 2002. After considering the above question of law, it has been held that where a person merely arranges modvatable document to the manufacturer without actual delivery of goods, penalty could not be imposed under rule 209A. Rule 26(2) of Central Excise Rules, 2002 prior to amendment on 1.3.2007 is akin to Rule 209A. - Decided against Revenue.
Issues:
1. Interpretation of penalty provisions under Rule 26 of Central Excise Rules, 2002 prior to amendment. 2. Applicability of penalty for facilitating fraudulent CENVAT credit. 3. Deletion of penalties imposed on registered dealers for issuing invoices without actual supply of goods. Analysis: Issue 1: Interpretation of penalty provisions under Rule 26 of Central Excise Rules, 2002 prior to amendment The case involved a dispute regarding the imposition of penalties under Rule 26 of the Central Excise Rules, 2002. The Tribunal dismissed the appeals by the revenue, stating that penalties could not be imposed for merely arranging modvatable documents without actual delivery of goods. The Commissioner (Appeals) and the Tribunal held that Rule 26(2) of the Rules, which allowed for penalties in such cases, was inserted only from 1.3.2007 and was not applicable to acts committed before that date. The judgment cited precedents to support this interpretation and concluded that penalties imposed prior to the amendment were not sustainable. Issue 2: Applicability of penalty for facilitating fraudulent CENVAT credit The controversy revolved around whether penalties could be imposed on registered dealers who facilitated fraudulent CENVAT credit by issuing invoices without actual supply of goods. The Tribunal upheld the cancellation of penalties, emphasizing that the penalties were not applicable to acts committed before the amendment of Rule 26(2) of the Central Excise Rules, 2002. The judgment referenced previous decisions to support this stance and highlighted that penalties could not be imposed under Rule 209A for mere issuance of invoices without goods delivery. Issue 3: Deletion of penalties imposed on registered dealers for issuing invoices without actual supply of goods The case involved penalties imposed on registered dealers for issuing invoices without supplying goods, leading to fraudulent CENVAT credit. The Commissioner (Appeals) and the Tribunal deleted these penalties, citing the absence of legal provisions for imposing penalties for such offenses during the relevant period. The judgment detailed the findings of the Commissioner (Appeals) in this regard, highlighting that penalties were set aside based on the lack of legal provisions prior to the amendment of Rule 26(2) of the Central Excise Rules, 2002. The Tribunal confirmed the deletion of penalties, emphasizing that penalties could not be imposed for dealing with invoices without actual movement of goods. In conclusion, the High Court dismissed the appeals by the revenue, upholding the decisions of the Commissioner (Appeals) and the Tribunal to delete the penalties imposed on registered dealers for facilitating fraudulent CENVAT credit through issuance of invoices without actual supply of goods. The judgment extensively analyzed the legal provisions, precedents, and factual circumstances to support the interpretation that penalties were not sustainable for acts committed before the relevant amendment to Rule 26 of the Central Excise Rules, 2002.
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