2009 (4) TMI 645 - AT - Central Excise

Summary

Issues Involved:
1. Disallowance of Cenvat credit and imposition of penalties.
2. Physical shortage of scrap.
3. Wrong availment of Cenvat credit on invoices.
4. Violation of principles of natural justice.
5. Applicability of Rule 26 of the Central Excise Rules, 2002.
6. Financial hardship and pre-deposit requirements.

Summary:

1. Disallowance of Cenvat Credit and Imposition of Penalties:
The Commissioner disallowed Cenvat credit of Rs. 76,71,216/- to M/s. BSMPL, imposed equivalent penalty, and ordered appropriation of Rs. 20,00,000/- already paid. Penalties were also imposed on various other entities and individuals u/r 26 of the Central Excise Rules, 2002.

2. Physical Shortage of Scrap:
A demand of Rs. 44,03,266/- was raised due to a physical shortage of 3233.125 MTs of scrap. It was found that the recorded stock included a previously noticed shortage of 2042.405 MT, and the actual shortage was 3229.605 MT, which was admitted by the Director of M/s. BSMPL.

3. Wrong Availment of Cenvat Credit on Invoices:
Cenvat credit was availed on invoices issued by various entities, but it was found that the material was not delivered to the premises mentioned in the invoices. Instead, brokers arranged for commercial scrap to be delivered, leading to wrongful Cenvat credit being passed on to M/s. BSMPL.

4. Violation of Principles of Natural Justice:
The appellant's claim of violation of natural justice due to non-supply of non-relied upon documents was rejected. The Tribunal found that all relied upon documents were received by M/s. BSMPL and that they had adopted dilatory tactics to delay proceedings.

5. Applicability of Rule 26 of the Central Excise Rules, 2002:
The Tribunal held that penalties u/r 26 could be imposed even if the individuals did not physically deal with the goods, referencing the Supreme Court's decision in Sachidananda Banerjee v. Sitaram Agarwal. It was noted that the Tribunal's earlier decisions did not consider this Supreme Court judgment.

6. Financial Hardship and Pre-deposit Requirements:
M/s. BSMPL was directed to pre-deposit Rs. 25 lakhs in addition to Rs. 20 lakhs already paid. Other entities and individuals were also directed to make specific pre-deposits towards penalties. The pre-deposit of penalties for some individuals was waived, and complete waiver was granted to three units in Daman due to their strong prima facie case.

Conclusion:
The Tribunal directed specific pre-deposits and granted partial waivers, emphasizing compliance with procedural requirements and the applicability of penalties under Rule 26. The appeals were to proceed based on these directions.