2009 (9) TMI 612 - HC - Central Excise

Penalty - cenvat credit - liability and quantum of duty payable on the goods licence obtained but instead of manufacturing, petitioner purchased goods from open market, supplied them to purchase under fake invoices and availed cenvat credit - absence of any adjudication and imposition of duty Held that - invoice is prepared indicating value of duty, the person preparing the invoice accepts that quantum of duty leviable on goods and when there is no dispute on quantum and leviability of goods, there is no question of adjudication and imposition of duty by the department no extra ordinary and equitable writ jurisdiction in favour of the petitioner

Summary

Issues:
Challenge to decisions of CESTAT and order in original by Commissioner, Central Excise. Imposition of penalty under Section 11AC of the Central Excise Act. Cancellation of Central Excise Registration. Recovery of dues from purchasers. Interpretation of Cenvat Credit Rules, 2004.

Imposition of Penalty under Section 11AC:
The petitioner was penalized under Section 11AC of the Central Excise Act for availing Cenvat Credit based on fake invoices. The Commissioner imposed a penalty of Rs. 1,86,15,263, equivalent to the credit availed of, along with education cess. The petitioner argued that the penalty was imposed without proper adjudication on the duty leviable, claiming he was not liable to pay any duty. However, the Court held that by availing Cenvat credit and issuing fake invoices, the petitioner admitted liability for the duty on the goods, thus no further adjudication was necessary. The Court found the penalty justified based on the petitioner's unretracted admission of the fraudulent activities.

Cancellation of Central Excise Registration:
The petitioner's Central Excise Registration was canceled as an administrative measure by the Commissioner. The petitioner challenged this cancellation, alleging it was not justifiable for appeal before the Tribunal. However, the Court upheld the cancellation, considering the petitioner's involvement in a significant duty evasion scheme impacting the public exchequer and the country's economy. The Court found no grounds to interfere with the cancellation order.

Recovery of Dues from Purchasers:
The respondent authorities recovered dues from the purchasers to whom the goods were sold by the petitioner. The Court determined that such recovery, if adjusted by the purchasers in their accounts with the petitioner, was a mutual arrangement between the parties and not directly attributable to the petitioner. The authorities were deemed justified in recovering the dues from the purchasers, and the Court found no fault in this aspect.

Interpretation of Cenvat Credit Rules, 2004:
The Court examined Rule 15 of the Cenvat Credit Rules, 2004, which allows for confiscation and penalty not exceeding the duty on contravened goods due to fraud or evasion. The petitioner argued against being classified as a manufacturer, but the Court noted that the petitioner had admitted to being a manufacturer by issuing fake invoices. The Court rejected the petitioner's contention that he was not a manufacturer and upheld the penalty based on the fraudulent activities. The Court found no merit in the petition and dismissed it, upholding the penalty and cancellation of registration.

In conclusion, the High Court of Gujarat upheld the penalty imposed under Section 11AC of the Central Excise Act, the cancellation of Central Excise Registration, and the recovery of dues from purchasers. The Court interpreted the Cenvat Credit Rules, 2004, to justify the penalty based on the petitioner's admission of fraudulent activities. The petition was dismissed, and the Court found no grounds to interfere with the orders issued by the Commissioner and the Tribunal.