2020 (1) TMI 1381 - AT - Central Excise

Levy of penalties under Rule 25 or 26 of the Central Excise Rules, 2002 - allegation of creation of fictitious firms in the name of co appellants to issue cenvatable invoices without accompanying the goods - HELD THAT - It has been alleged that the invoices in question have been issued by M/s. Moral Alloys and M/s. Unnati Alloys but, no investigation has been conducted with the Directors/authorised persons of these appellants to ascertain the fact that weather they have issued the invoices in question or not? In that circumstance, the investigation is faulty. Further, in the absence of evidence on record that if the invoices were not accompanying the goods then from where these manufacturers have procured the goods who has manufactured the dutiable goods which has been cleared on payment of duty. In some of the cases, the cenvet credit has already been allowed, therefore, no penalty is imposable on the appellants under Rules 25/26 of the Central Excise Rules, 2002. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeal against penalties under Rule 25 or 26 of the Central Excise Rules, 2002 based on fictitious firms issuing cenvatable invoices without accompanying goods.

Analysis:
The case involved multiple appellants appealing against penalties imposed under Rule 25 or 26 of the Central Excise Rules, 2002 for issuing cenvatable invoices without accompanying goods. The investigation revealed that fictitious firms were set up to issue such invoices, enabling manufacturers and buyers to avail inadmissible cenvat credit. The appellants had admitted to issuing invoices without accompanying goods, leading to penalties and denial of Cenvat credit. However, no investigations were conducted with the directors or authorized representatives of the firms issuing the invoices. Statements from transporters and parties involved varied, with some denying transporting goods. The Revenue argued that the credit was fraudulently distributed without actual goods being received, as admitted by one appellant. The appellants contended that penalties should not be imposed based on third-party statements and that they had received and supplied the goods.

The Tribunal considered the arguments and previous judgments, including one where the benefit of doubt was given to appellants due to lack of evidence supporting non-receipt of goods against invoices. It was noted that proper care was taken by the appellants in examining invoices, as required by Cenvat Credit Rules. The Tribunal found faults in the investigation, particularly the lack of evidence regarding the issuance of invoices by the firms in question. As some cases had already allowed cenvat credit, the Tribunal held that no penalties could be imposed on the appellants under Rules 25/26 of the Central Excise Rules, 2002. Consequently, the impugned orders imposing penalties were set aside, and the appeals were allowed with any consequential relief.

In conclusion, the Tribunal's decision was based on the lack of conclusive evidence regarding the non-receipt of goods against invoices and the faulty investigation process. The judgment emphasized the importance of proper examination of invoices and the need for substantial evidence before imposing penalties under the Central Excise Rules.