2013 (1) TMI 201 - AT - Central Excise

Rebate claim - Central Excise duty without physical movement of goods - Held that - As the respondents admit that they had simply debited the cenvat credit in their books and without supply of any goods issued invoices and facilitated M/s. Ruby Silk Mills to show that they have received fabrics and make false claims for rebate. As decided in M/s Vee Kay Enterprises, Faridabad Versus Commissioner of Central Excise 2011 (3) TMI 133 - PUNJAB AND HARYANA HIGH COURT the person who purports to sell goods cannot say that he was not a person concerned with the selling of goods and merely issued invoice or that he did not contravene a provision relating to evasion of duty. The appellant issued invoices without delivery of goods with intent to enable evasion of duty to which effect a finding has been recorded and which finding has not been challenged. Thus, unable to hold that appellant was not liable to pay any penalty - appeal filed by the Revenue has to be allowed. Penalty imposed equal to the cenvat credit availed on the basis of fraudulent invoices issued by the appellant is somewhat excessive. In view of the fact that penalty has been imposed on the others who have claimed rebate and cenvat credit also has been denied and rebate sanctioned has been demanded and also in view of the observations of the Hon ble High Court that the penalty under Rule 26 does not have minimum prescribed amount, the quantum of penalty has to be commensurate with the gravity of the offence. Thus penalty is required to be reduced to Rs.Two lakhs.

Summary

Issues:
Penalty imposition under Rule 26 on the respondent in connection with an offense committed by unscrupulous persons in the name of a company. Appeal against setting aside the penalty by the original adjudicating authority.

Analysis:
1. The penalty was imposed on the respondent under Rule 26 of the Central Excise Rules in connection with fraudulent activities involving the issuance of invoices without physical delivery of goods, facilitating false rebate claims. Investigation revealed the involvement of various entities, including suppliers and exporters, in the scheme to claim rebates through fabricated transactions. The respondent's company was found to have issued invoices without the actual movement of goods, enabling M/s Ruby Silk Mills to make false claims for rebate.

2. The original adjudicating authority imposed a penalty of Rs.5,86,328 on the respondent, which was set aside in the appeal. The Revenue filed an appeal against this decision, arguing that penalty should be imposed even if no physical goods were transported or supplied, citing a precedent from the Hon'ble High Court of Punjab & Haryana.

3. The Commissioner, in the impugned order, held that since no goods were transported or supplied, no penalty was imposable under Rule 26. However, the Revenue contended that penalty should be levied in such circumstances, referring to the decision of the Hon'ble High Court. The respondent, in written submissions, acknowledged issuing invoices without physical movement of goods but emphasized that the duty shown on the invoices was genuine and paid from the Cenvat Account.

4. Citing the case of Vee Kay Enterprises, the Hon'ble High Court of P&H held that even if Rule 26(2) did not apply, penalty could be levied for dealing with goods liable for confiscation. The court emphasized that issuing invoices without delivering goods to enable duty evasion warranted penalty imposition. The court highlighted the discretion in determining the quantum of penalty based on mitigating or aggravating circumstances.

5. Considering the precedent and the gravity of the offense, the Tribunal allowed the Revenue's appeal but reduced the penalty amount imposed on the respondent to Rs.2 lakhs, deeming the original penalty excessive. The Tribunal emphasized that the penalty should be commensurate with the offense's seriousness and the quantum involved, indicating a need for a balanced approach in penalty imposition based on the circumstances of each case.