2013 (12) TMI 749 - AT - Central Excise

Penalty under Rule 15(2) of the Cenvat Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944 Personal penalty under Rule 26(1) Bogus invoices issued without supplying any materials Held that -There is no allegation against the appellant that he had dealt with any excisable goods which he knew or had reason to believe were liable to confiscation - Under Rule 26 of the Central Excise Rules, as the same stood during the period of dispute, penalty was imposable on any person who acquires possession or is in any way concerned in transporting, removing, depositing, keeping concealing, selling or purchasing, or in any other manner dealing with any excisable goods which he knew or had reason to believe, are liable to confiscation. The only provision for imposing penalty for taking Cenvat credit wrongly is Rule 15 of Cenvat Credit Rules, 2004 under which the penalty can be imposed on the person who takes the Cenvat credit wrongly - Cenvat credit has been availed by M/s. Asha Telecom Pvt. Ltd., not by Shri Ashok Verma, it is M/s. Asha Telecom Pvt. Ltd., who will be liable for penalty and not the Director of the appellant-company Thus, Penalty under Rule 26 of Central Excise Rules is not sustainable Decided in favour of Assessee.

Summary

Issues:
1. Imposition of penalty on the appellant under Rule 26 of the Central Excise Rules for wrongly availing Cenvat credit based on bogus invoices.

Analysis:
The case involved the appellant, a Director of a company engaged in manufacturing telephone parts, accused of taking Cenvat credit of Rs. 8,19,043 based on 29 invoices from registered dealers that were later found to be bogus. The jurisdictional Addl. Commissioner confirmed the demand for wrongly taken Cenvat credit against the company and imposed penalties on both the company and the Director. The Director appealed against the penalty imposed on him under Rule 26 of the Central Excise Rules, which was upheld by the Commissioner (Appeals).

During the hearing, the appellant's counsel argued that the penalty under Rule 26 could only be imposed on individuals directly involved in dealing with excisable goods liable for confiscation, not for wrongly availing Cenvat credit. The Department's representative defended the penalty imposed on the Director.

The Tribunal examined the case and found that the appellant had allowed the company to avail Cenvat credit based on fraudulent invoices without being directly involved in dealing with excisable goods liable for confiscation. The Tribunal noted that Rule 26 did not provide for penalties related to wrongly availing Cenvat credit. It was highlighted that Rule 15 of the Cenvat Credit Rules, 2004 specifically addressed penalties for incorrectly taking Cenvat credit, which should apply to the company, not the Director. The Tribunal concluded that the penalty imposed on the Director under Rule 26 was not sustainable, set it aside, and allowed the appeal.

In summary, the Tribunal ruled in favor of the appellant, setting aside the penalty imposed on the Director under Rule 26 of the Central Excise Rules for wrongly availing Cenvat credit based on bogus invoices, stating that such penalties should be applied to the company under Rule 15 of the Cenvat Credit Rules, 2004.