2010 (9) TMI 457 - AT - Central Excise

Penalty on dealer cenvat credit - Penalty under Rule 173Q is not imposable on the registered dealer in respect of wrong or incorrect particulars in the invoice in respect of additional duty of customs, particularly in view of the fact that, the Director of the manufacturer-firm has admitted in his statement that inputs in question were diverted in the open market. Appeal allowed

Summary

Issues: Appeals against imposition of penalties under Rule 173Q of Central Excise Rules for issuing invoices without supplying goods.

Analysis:
The appellants contested penalties imposed under Rule 173Q of the Central Excise Rules, arguing that the rule was amended w.e.f. 4-7-1999, making registered dealers liable for wrong or incorrect particulars in invoices related to additional duty paid under the Customs Tariff Act. The appellants maintained that the invoices in question were issued before this amendment. They cited Board's Circular No. 472/38/99-CX, dated 21-7-1999, clarifying that penal provisions for wrongfully passing on credit of additional duty under the Customs Tariff Act apply from 4-7-1999. The dispute centered on the credit availed by the manufacturer on customs duty, with allegations of supplying only duty paying documents. Given the effective amendment date of 4-7-1999, the Tribunal found merit in the appellants' argument, stating that penalties under Rule 173Q could not be imposed on the registered dealer for incorrect particulars in invoices regarding customs duty, especially since the Director of the manufacturer admitted diversion of inputs in the open market.

The Tribunal, after considering the above arguments, concluded that the penalties imposed on the appellants were not sustainable. They allowed the appeals, indicating that the penalties under Rule 173Q were not applicable in this case. The judgment highlighted the importance of the effective date of the rule amendment and the circumstances surrounding the issuance of invoices by the registered dealer. The admission of diversion of inputs by the manufacturer's Director further supported the decision to overturn the penalties.