2016 (2) TMI 587 - AT - Central Excise

Penalties imposed under the provisions of Rule 26(2) of the Central Excise Rules 2002 - appellants herein have issued invoices for the scrap purchased from manufacturing industries and passed on the Cenvat credit of duty but factually they have only delivered the market scrap to the recipients - Held that - As find from a specimen Invoice No. 2857 of 29-9-2007 the, delivery challan issued by the main appellant is clearly indicates that goods waste and scrap are non-excisable goods and the description given is also loose scrap; while the tax invoice indicates the same as waste & scrap procured from Jyoti Structures Ltd. In my considered view, when the challan issued by the appellant indicates the goods as non-excisable goods, cannot become an excisable goods on which payment made. There is no explanation put forth by the appellant on this specific point. In the considered view the findings recorded by the first appellate authority as reproduced herein above clearly indicates that the appellant did not supply the inputs as mentioned in the duty paying documents. In view of the above find that both the appellants have not made out any case in their favour. The main appellant being a Pvt. Ltd. has been penalized under Rule 26(2) of Central Excise Rules, 2002 and the penalty needs to be upheld, while the 2nd appellant Shri Lalit Inderchand Baliya being a Director is also penalized under the same Rule. The penalty imposed on the 2nd appellant is unwarranted. In the facts and circumstances of the case, penalty imposed on the 2nd appellant is set aside while the penalty imposed on the main appellant is upheld as has been ordered by the first appellate authority. - Decided in favour of assessee

Summary

Issues:
Penalties imposed under Rule 26(2) of Central Excise Rules 2002 for passing ineligible benefits by issuing invoices for scrap but delivering market scrap instead.

Analysis:
The two appeals before the Appellate Tribunal CESTAT MUMBAI were directed against Order-in-Appeal No. PUN-EXCUS-002-APP-099 & 100/13-14, dated 9-10-2013. The issue involved penalties imposed by the adjudicating authority and upheld by the first appellate authority, albeit with a reduction in penalties for both appellants. The penalties were imposed under Rule 26(2) of the Central Excise Rules 2002, based on the allegation that the appellants issued invoices for scrap purchased from manufacturing industries, passing on Cenvat credit of duty, but actually delivered market scrap to the recipients.

Upon perusal of the records, it was argued by the learned Counsel that the main appellant had issued invoices and filed weigh bridge slips along with tax invoices. While only nine transactions were doubted, the statements of certain individuals indicated that the material was supplied based on visual inspection. Conversely, the learned D.R. highlighted statements suggesting that the goods described in the invoices were not received as claimed.

The first appellate authority upheld the penalties but reduced them, citing confessional statements indicating the appellants' knowledge of non-supply of goods as per tax invoices. The authority noted the absence of transport documents and payments made by cheques in records. The first appellate authority observed that Super Craft, the recipients, had reversed Cenvat credit, and the main appellant did not provide a satisfactory explanation regarding discrepancies between the description in invoices and actual goods supplied.

In the final decision, the penalty imposed on the main appellant was upheld, while the penalty on the second appellant, a Director, was set aside. The Tribunal found that the appellants failed to establish their case, leading to the main appellant being penalized under Rule 26(2) of Central Excise Rules 2002. The judgment was pronounced on 12-6-2015, disposing of both appeals accordingly.