2008 (4) TMI 742 - AT - Central Excise

Summary

Issues:
Challenge against penalty imposed under Section 11AC of the Central Excise Act, read with Rule 15(2) of the Cenvat Rules.

Analysis:
The appeals in this case arose from three different orders but were disposed of collectively due to the identical issue at hand - the challenge against the penalty imposed on the appellants under Section 11AC of the Central Excise Act, in conjunction with Rule 15(2) of the Cenvat Rules.

Upon hearing both sides, it was established that the appellants were involved in manufacturing grey fabrics and had received raw materials, specifically yarn, from other appellants using Central Excise invoices. They availed Cenvat credit and paid Central Excise duty on the final product, which was then cleared to a specific exporter. Subsequently, investigations revealed suspicions regarding the legitimacy of the raw material suppliers, leading to proceedings against the appellants. The original adjudicating authority reduced the rebate claim of the exporter and imposed penalties on the appellants, prompting the present appeals.

The appellants vehemently denied the allegations of using fake invoices for availing credit, emphasizing that they had received polyester yarn from various legitimate suppliers. They argued that since no duty demand was confirmed against them under Section 11A(2) of the Central Excise Act, the penal provisions of Section 11AC could not be invoked.

The presiding judge concurred with the appellants' arguments, noting the lack of concrete evidence establishing the suppliers as fake and the absence of duty confirmation against the appellants under Section 11A(2). Given these circumstances, the judge ruled that Section 11AC penalties could not be justified. Consequently, the penalties imposed on the appellants were set aside, and all appeals were allowed, granting consequential relief to the appellants.

This judgment highlights the importance of concrete evidence and adherence to statutory provisions in invoking penal provisions under the Central Excise Act. The decision underscores the necessity for duty confirmation against an individual before imposing penalties under Section 11AC, ensuring procedural fairness and safeguarding against unwarranted penal consequences.