2018 (10) TMI 1775 - AT - Central Excise

Recovery of CENVAT credit - trading of goods - It was alleged that goods actually contained in the said truck was not as per the description mentioned in the invoices and were locally procured scrap, on which no central excise duty was paid - Invocation of Rule 14 and 26 of CER - invocation of section 119 of CEA - HELD THAT - It is an admitted fact on record that the appellant No.1 in this case is a registered dealer, engaged in the activity of trading of goods. Invocation of Rule 14 ibid - HELD THAT - The said rule mandates for recovery of cenvat credit and payment of interest, in the eventuality, where credit has been taken or utilized wrongly. On reading of the statutory provision, it transpires that the said rule can only be applicable for initiation of proceedings against the manufacturer or the service provider - In this case, since the appellant No.1 is neither a manufacturer of excisable goods nor a service provider, engaged in providing taxable service, the provisions of Rule 14 ibid cannot be invoked for recovery of the cenvat credit and for payment of interest. Invocation of Section 119 ibid - HELD THAT - It is not the case of Revenue that the appellant No.1 had used any other goods to conceal the offending goods i.e. scrap. Thus, confiscation of the said goods is not proper and justified and accordingly, redemption fine cannot be imposed on the appellant. Since the goods are not liable for confiscation, the provisions of Rule 25 ibid will also not be attracted for imposition of penalty on the appellants. Applicability of the provisions of Rule 26 ibid - HELD THAT - Such statutory provisions have correctly been invoked on the appellant No.2 for imposition of penalty inasmuch as he was instrumental in issuance of the wrong invoices to the customers, facilitating availment of ineligible cenvat benefit. However, considering the overall facts and circumstances of the case, the quantum of penalty can be reduced in the interest of justice on the appellant No.2. Accordingly, the penalty imposed on the appellant No.2 is reduced from ₹ 1,77,993/- to ₹ 50,000/-. Appeal allowed in part.

Summary

Issues: Application of Rule 14 of Cenvat Credit Rules, 2004 for a dealer of excisable goods, applicability of Section 119 of the Customs Act, 1962, imposition of penalties under Rule 25 and 26 of the Central Excise Rules, 2002.

Analysis:
1. The case involved M/s. J.V. Seamless India, a partnership firm dealing in scrap, facing a show cause notice proposing denial of cenvat credit and confiscation of goods due to discrepancies found during a search operation. The adjudicating authority and the Commissioner (Appeals) upheld the demands, leading to appeals before the Tribunal.

2. The appellant's advocate argued against invoking Rule 14 of Cenvat Credit Rules, 2004 for a dealer of excisable goods, contending that Section 119 of the Customs Act, 1962 was not applicable as the seized local scrap was not concealed in goods. The advocate also challenged the imposition of penalties under Rule 25 and 26 of the Central Excise Rules, 2002, citing precedents from Tribunal orders.

3. The Revenue's representative supported the findings in the impugned order, leading to a detailed hearing before the Tribunal. After considering both sides and examining the records, the Tribunal analyzed the legal provisions and facts of the case.

4. The Tribunal noted that Rule 14 of Cenvat Credit Rules, 2004 is intended for manufacturers or service providers for recovery of credit taken or utilized wrongly, which does not apply to a dealer like the appellant. Regarding Section 119 of the Customs Act, 1962, since there was no concealment of goods, confiscation and redemption fine were deemed unjustified.

5. The Tribunal found Rule 25 of the Central Excise Rules, 2002 inapplicable due to the goods not being liable for confiscation. However, Rule 26 was correctly invoked for imposing penalties on the appellant responsible for issuing incorrect invoices. The Tribunal reduced the penalty amount for the appellant responsible for facilitating ineligible cenvat benefit.

6. Consequently, the Tribunal allowed the appeal of the appellant No.1, setting aside the impugned order. The penalty under Rule 26 imposed on the appellant No.2 was reduced from &8377; 1,77,993 to &8377; 50,000 in the interest of justice. The judgment was pronounced in open court, disposing of both appeals accordingly.