2013 (2) TMI 224 - AT - Central Excise

Penalty under rule 15 of CCR, 2004 or Rule 26 of Central Excise Rules, 2002 - Held that - As it is not in dispute that the appellant issued CENVATable invoices without supply of the materials specifically described in such invoices, their conduct would attract sub-rule (2) of Rule 26 of the Central Excise Rules, 2002. This provision had come into force w.e.f. 01/03/2007. The above offence was committed by the appellant in April 2007. The Department could very well have invoked Rule 26(2) to penalize the offender.However, they chose Rule 15 of the CCR, 2004. As the party, in their reply to the show-cause notice, did not claim inapplicability of Rule 15 and, in such circumstances, it did not occur to the Department that a corrigendum should be issued to correct the legal error. It appears, it was before the Commissioner(Appeals) that the party, for the first time, took the contention that Rule 15 ibid was not applicable. This contention is being reiterated before the Tribunal. Thus on the facts of this case, it cannot be gainsaid that Rule 15 is not applicable and, therefore, the penalty imposed thereunder is liable to be set aside, and it is ordered accordingly. In the result, the appeal succeeds. Mistake of fact cannot be rectified at later stage whereas a mistake of law is rectifiable subject, of course, to legal constraints. In the present case SCN was issued to the appellant for the sole purpose of penalizing them for the offence alleged therein. It alleged the facts correctly but invoked the law wrongly. There being no period of limitation for an action for penalty, the Department could have issued a corrigendum to the show-cause notice. But such corrigendum should have been issued before adjudication of the show-cause notice. The Department cannot be permitted to issue such corrigendum or to issue a fresh show-cause notice after adjudication of the case for, to allow them to do so would amount to multiplicity of proceedings.

Summary

Issues:
1. Applicability of Rule 15 of the CENVAT Credit Rules, 2004 for imposing penalty.
2. Interpretation of legal provisions regarding issuance of CENVATable invoices without supply of materials.
3. Rectifiability of legal errors in invoking the wrong provision of law.

Analysis:

Issue 1: Applicability of Rule 15 for Penalty
The appeal raised the question of whether a penalty should be imposed on the appellant under Rule 15 of the CENVAT Credit Rules, 2004. The appellant, a registered Central Excise dealer, issued CENVATable invoices without supplying materials to a construction company. The adjudicating authority imposed a penalty under Rule 15, which was upheld by the Commissioner(Appeals). However, the appellant argued that Rule 15 was not applicable to the facts of the case. The Tribunal agreed with the appellant, stating that the penalty imposed under Rule 15 was not justified, and the appeal succeeded.

Issue 2: Interpretation of Legal Provisions
The argument revolved around whether Rule 15 of the CENVAT Credit Rules, 2004 or Rule 26 of the Central Excise Rules, 2002 should have been invoked in the case. The appellant contended that Rule 26 of the Central Excise Rules, 2002 was more relevant due to the nature of the offense committed. The Tribunal noted that the appellant did not initially claim the inapplicability of Rule 15 in their response to the show-cause notice. However, upon review, it was found that Rule 15 was not suitable for the situation, and the penalty imposed under it was set aside.

Issue 3: Rectifiability of Legal Errors
The Tribunal addressed the legal mistake made by the Department in invoking the wrong provision of law. It was established that while a mistake of fact cannot be rectified at a later stage, a mistake of law can be corrected, subject to legal constraints. The Department could have issued a corrigendum to the show-cause notice before adjudication to rectify the legal error. However, post-adjudication, issuing a corrigendum or a fresh show-cause notice was deemed impermissible to avoid multiple proceedings. The Tribunal emphasized the importance of correcting legal errors within the appropriate procedural framework.

In conclusion, the Tribunal ruled in favor of the appellant, setting aside the penalty imposed under Rule 15 of the CENVAT Credit Rules, 2004 due to its inapplicability to the circumstances of the case. The judgment highlighted the significance of correctly applying legal provisions and rectifying legal errors promptly within the procedural boundaries to ensure fair and effective enforcement of Central Excise laws.