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2014 (7) TMI 478 - AT - Central ExciseCenvat Credit - Issuance of bogus invoices - penalty on co-noticee - appellant being co-noticee was granted full immunity by the Settlement Commission - Penalty under Rule 26 of Central Excise Rules, 2001/2002 and Rule 13/15 of Cenvat Credit Rules, 2002/2004 - Benefit of Cenvat credit of duty paid on various inputs and capital goods - facility to manufacture the inputs not available - Non registration with Central Excise department - Assessee were only issuing invoices, without supply of goods or inputs, on the basis of which M/s. HUF was availing the credit - Difference of opinion - Matter referred to larger bench with following questions of law - Whether appeals of appellant shall be allowed as held by learned Member (Judicial) OR Whether appeals of appellant shall be dismissed as held by learned Member (Technical).
Issues Involved:
1. Imposition of penalties under Rule 26 of Central Excise Rules, 2001/2002 and Rule 13/15 of Cenvat Credit Rules, 2002/2004. 2. Whether penalties can be imposed on appellants when the main noticee has been granted immunity by the Settlement Commission. 3. Role of appellants in issuing invoices without actual supply of goods. 4. Applicability of precedents and legal principles regarding immunity and penalties. Issue-wise Detailed Analysis: 1. Imposition of Penalties: The judgment addresses the imposition of penalties on various appellants under Rule 26 of Central Excise Rules, 2001/2002, and Rule 13/15 of Cenvat Credit Rules, 2002/2004. The penalties imposed were: - Shri Mukesh Garg: Rs. 66,55,075/- - Ms. Mamta Garg: Rs. 47,80,983/- - Shri Naveen Agarwal: Rs. 13,33,321/- - Ms. Aruna Agarwal: Rs. 2,09,760/- 2. Immunity Granted to Main Noticee: The main issue is whether penalties can be imposed on appellants when the main noticee, M/s. HUF, has been granted immunity from penalties and prosecution by the Settlement Commission. The Tribunal referred to the decision in SK Colombowala vs. CCE, which held that once the main noticee settles the dispute with the Settlement Commission, the case against co-noticees also comes to an end, and penalties cannot be imposed on them. 3. Role of Appellants in Issuing Invoices: The appellants were found to be issuing invoices without actual supply of goods, enabling M/s. HUF to avail Cenvat credit fraudulently. The Tribunal noted that these firms did not have the facilities to manufacture the inputs and were not registered with the Central Excise department. They were only issuing invoices to facilitate M/s. HUF in availing the credit. The detailed findings highlighted the fraudulent activities and the role of each appellant in the scam. 4. Applicability of Precedents and Legal Principles: The Tribunal discussed various precedents where penalties on co-noticees were set aside when the main noticee settled the dispute with the Settlement Commission. It was emphasized that the same legal principles should apply in this case. The Tribunal also referred to the Supreme Court decision in Union of India vs. Onkar S. Kanwar, which held that immunity granted to the main noticee extends to co-noticees. However, the Technical Member disagreed, citing that immunity granted by the Settlement Commission does not automatically extend to co-noticees. Separate Judgments Delivered: - Judicial Member's View: The Judicial Member followed the precedent set by SK Colombowala and other similar cases, concluding that penalties on the appellants should be set aside since the main noticee had settled the dispute with the Settlement Commission and was granted immunity. - Technical Member's View: The Technical Member disagreed, stating that immunity granted to the main noticee does not extend to co-noticees who were not before the Settlement Commission. The Technical Member emphasized the fraudulent nature of the activities and upheld the penalties imposed by the adjudicating authority. Conclusion: The Tribunal was divided on the issue, leading to a difference of opinion. The matter was referred to the Hon'ble President for an appropriate order. The Judicial Member's view was to allow the appeals and set aside the penalties, while the Technical Member's view was to dismiss the appeals and uphold the penalties. The final decision was pending based on the resolution of this difference of opinion.
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