2011 (8) TMI 250 - AT - Central Excise

cenvat credit - Rule 26 of Central Excise Rules 2002 and under Rule 13 of Cenvat Credit Rules 2002 - whether Shri Navneet Agarwal is liable to penalty under Rule 26 of the Central Excise Rules 2002 when the Rule 26(2) was not in force - The view taken by the Hon ble High Court of Punjab & Haryana was that when a person was concerned in selling and dealing with the goods which were liable to confiscation under Rule 25(1) (d) Rule 26(1) is also applicable - Decided against the assessee

Summary

Issues:
1. Imposition of penalty under Rule 26 of Central Excise Rules, 2002 on a director for issuing invoices without supplying goods.
2. Jurisdiction of the original adjudicating authority to impose penalty under Rule 13 of Cenvat Credit Rules, 2002.

Issue 1: Imposition of Penalty under Rule 26 of Central Excise Rules, 2002
The case involved M/s. Shri Ram Tubes Pvt. Limited availing cenvat credit against invoices issued by M/s. Annapurna Impex Pvt. Limited without actual supply of goods. The original adjudicating authority imposed a penalty on the director of M/s. Annapurna Impex Pvt. Limited under Rule 26 of Central Excise Rules, 2002. However, on appeal, the penalty was set aside on the grounds that the director had only issued invoices and did not handle the goods directly. The learned Commissioner also opined that the original adjudicating authority lacked jurisdiction to impose the penalty under Rule 13 of Cenvat Credit Rules, 2002.

Issue 2: Jurisdiction of the Original Adjudicating Authority
The Revenue contended that the penalty under Rule 26 of Central Excise Rules, 2002 should have been imposed on the director as per the decision of the Larger Bench of the Tribunal in a specific case. They cited a judgment from the Punjab & Haryana High Court which held that the penalty under Rule 26 of Central Excise Rules, 2002 could be imposed even before the introduction of Rule 26(2). The High Court reasoned that when a person is involved in selling goods liable for confiscation, Rule 26(1) is applicable. The High Court emphasized that merely issuing invoices without delivering goods does not absolve one from liability if involved in selling goods. Consequently, the impugned order was set aside, and the appeal by the Revenue was allowed based on the High Court's interpretation.

In conclusion, the judgment addressed the issue of imposing penalties under Rule 26 of Central Excise Rules, 2002 on a director for issuing invoices without supplying goods. It also clarified the jurisdiction of the original adjudicating authority regarding penalties under Rule 13 of Cenvat Credit Rules, 2002. The decision highlighted the importance of involvement in selling goods liable for confiscation and upheld the imposition of penalties even before the introduction of specific rules. The judgment provided a detailed analysis based on legal principles and precedents, ultimately setting aside the impugned order and allowing the Revenue's appeal.