2015 (8) TMI 1362 - AT - Central Excise

Imposition of penalty u/r 26 of Central Excise Rules, 2002 - bogus invoices issued in 2006 - Held that - Such act has been made punishable by imposition of penalty under sub clause (2) of Rule 26 w.e.f. 1.03.2007 only. Admittedly during the period when the appellants issued the invoices the said provisions were not in existence. Needless to say that penalty cannot be imposed upon the appellants under a provision which was not in existence when the alleged act was not made punishable - appeal allowed - decided in favor of appellant.

Summary

Issues:
Penalty imposed under Rule 26 of Central Excise Rules, 2002 - Allegation of facilitating fraudulent rebate of excise duty through bogus invoices - Imposition of low penalty - Applicability of penalty provision w.e.f. 1.03.2007 only.

Analysis:
1. The appellants, engaged in manufacturing steel products, supplied raw materials to a company involved in production and export of stainless steel utensils. Allegations were made that the company claiming rebate on duty paid raw materials did not physically receive the materials but used invoices for claiming rebates. The penalty under Rule 26 of Central Excise Rules, 2002 was imposed on the appellants and other co-noticees, with varying amounts of penalties imposed on different parties.

2. The Revenue appealed against the low penalty imposed, arguing that the penalties did not match the severity of the acts committed. The Commissioner (Appeals) enhanced the penalty on the appellants, leading to the appellants filing an appeal against this decision.

3. The core allegation against the appellants was that they facilitated the fraudulent rebate of excise duty by issuing bogus invoices. The Department claimed that the raw materials mentioned in the invoices were not physically received by the company due to discrepancies in the loading capacity of the vehicles mentioned in the invoices.

4. The appellants' counsel argued that the overloading of vehicles is common in transportation and that the invoices were issued before the introduction of the penalty provision under Rule 26. They contended that since the provision was not in force when the alleged acts occurred, the penalty could not be imposed.

5. The Department reiterated its stance, citing suppression of facts and willful misstatement as reasons for invoking the extended period for imposing penalties.

6. After hearing both sides and reviewing the records, it was established that the penalty provision under sub clause (2) of Rule 26 was applicable only from 1.03.2007 onwards. As the alleged acts predated this provision, the imposition of penalties was deemed unsustainable. The appellants' reliance on a favorable decision for a co-noticee in a similar case further supported their argument.

7. Consequently, the penalty imposed on the appellants under Rule 26 was set aside as unsustainable, and the appeal was allowed with any consequential reliefs to follow.

This judgment highlights the importance of the temporal application of penalty provisions in excise rules and the necessity for penalties to align with the legal framework in force at the time of the alleged misconduct.