2011 (12) TMI 447 - AT - Central Excise

Denial of CENVAT CRedit - Bogus invoices - Penalty under Rule 15(2) - Held that - allegation against the appellant firm as well as Shri M.K. Jain is that they took Cenvat credit on the basis of bogus invoices while no material had been received. In my view, while availing bogus Cenvat credit would attract penalty under Rule 15(2) of Cenvat Credit Rules, 2004 readwith Section 11AC, for the same activity penalty under Rule 26 would not be attracted. From the records, it is seen that other than this, there is no allegation against Shri M.K. Jain. There is nothing on record to indicate that Shri M.K. Jain had knowingly acquired possession of any goods or was in any manner concerned in transporting, depositing, concealing, selling or purchasing or in any other manner dealing with any excisable goods which he knew or had reason to believe are liable for confiscation. In view of this, I am of the view that imposition of penalty on Shri M.K. Jain was not called for and the impugned order upholding the same is not sustainable - Decided in favour of assessee.

Summary

Issues:
- Imposition of penalty on a partner of a partnership firm for availing Cenvat credit on the basis of bogus invoices.
- Whether separate penalties on a partnership firm and its partners can be imposed for different contraventions.

Analysis:
- The appellant partnership firm was alleged to have availed Cenvat credit based on bogus invoices, leading to a demand of Rs. 5,35,836 along with penalties imposed by the Jurisdictional Joint Commissioner. The penalty was also imposed on the partner of the firm under Rule 26 and 27. The Commissioner (Appeals) upheld the penalty on the partner, leading to the present appeal challenging the imposition of penalty on the partner only.
- The appellant's counsel argued that separate penalties on the firm and the partner for the same contravention are not justified, citing judgments from various High Courts and a Tribunal. The counsel contended that there was no evidence to justify the penalty on the partner under Rules 26 and 27 of the Central Excise Rules.
- The respondent defended the penalty imposition, stating that penalties on the firm and the partner can be separate if the contraventions are different. Referring to a High Court judgment, the respondent emphasized that the partner was aware of the fraudulent Cenvat credit availed by the firm based on bogus invoices, justifying the penalty under Rules 26 and 27.
- The Tribunal considered the arguments from both sides and examined the records. It opined that separate penalties on the partnership firm and the partner can be imposed if the nature of contravention is different. While the firm was penalized for availing Cenvat credit fraudulently, the partner could be penalized under Rule 26 if there was evidence of his involvement in activities related to excisable goods liable for confiscation.
- Rule 26 allows for penalties on individuals involved in dealing with excisable goods they know are liable for confiscation. The Tribunal found that the partner had no evidence against him other than the Cenvat credit issue. As there was no indication of his involvement in activities related to excisable goods, the penalty on the partner was deemed unjustified, and the impugned order upholding the penalty on the partner was set aside. The appeal was allowed.