2009 (9) TMI 814 - AT - Central Excise

Penalty u/r 209A of the erstwhile Central Excise Rules, 1944 and Rule 26 of Central Excise Rules, 2001 - Held that - the appellant was not only engaged in issuing cenvatable invoices without any physical movement of the goods in the name of his firms but also he was settling the accounts of other registered dealers/washer manufacturing units, who had supplied invoices to M/s. Asian Alloys Ltd. without any physical movement of the goods - the goods supplied by the registered dealers and washer manufacturing units were diverted, which are liable to confiscation - penalty u/r 26 of the Rules is justified - we reduce the penalty from ₹ 50,00,000/- to ₹ 10,00,000/- - decided partly in favor of appellant.

Summary

Issues:
Imposition of penalty under Rule 209A of the Central Excise Rules, 1944 and Rule 26 of Central Excise (No. 2) Rules, 2001.

Analysis:
The appellant appealed against a penalty of Rs. 50,00,000 imposed under Rule 209A of the Central Excise Rules, 1944 and Rule 26 of Central Excise (No. 2) Rules, 2001. The case involved the appellant, who was the proprietor of a firm and a partner in another, both registered dealers. It was discovered that M/s. Asian Alloys Ltd. fraudulently availed Cenvat credit based on invoices from registered dealers and washer manufacturing units, without actual supply of goods. The Commissioner confirmed the duty demand and imposed penalties on various entities, including the appellant, for facilitating the fraudulent transactions.

The appellant argued that since penalties were separately imposed on the proprietorship and partnership firms, the penalty on the appellant was unjustified. Additionally, the appellant contended that the penalty amount was excessive, citing a Tribunal decision that penalties cannot be invoked where there is no movement of goods and the assessee is only issuing invoices. The appellant claimed not to have handled the goods directly, thus challenging the penalty under Rule 26.

The Revenue, however, supported the Commissioner's findings, emphasizing the appellant's admission of procuring cenvatable invoices to assist M/s. Asian Alloys Ltd. in availing credit without actual supply of goods. The Revenue argued that the penalties on the firms for issuing invoices without supplying goods were distinct from the penalty imposed on the appellant for facilitating the fraudulent transactions.

After reviewing the facts and submissions, the Tribunal found that the appellant had a significant role in facilitating the fraudulent transactions by issuing cenvatable invoices without physical movement of goods and settling accounts of other dealers. The Tribunal agreed with the Revenue that a separate penalty on the appellant was warranted. While acknowledging that the penalty amount was excessive, the Tribunal reduced it from Rs. 50,00,000 to Rs. 10,00,000. The Tribunal concluded that the penalty reduction was appropriate given the circumstances of the case.

In summary, the Tribunal upheld the imposition of penalties under Rule 209A and Rule 26 on the appellant for his involvement in facilitating fraudulent transactions through the issuance of cenvatable invoices without actual supply of goods. The penalty amount was reduced from Rs. 50,00,000 to Rs. 10,00,000 considering the appellant's role and the excessive nature of the initial penalty.