2020 (3) TMI 1339 - AT - Central Excise

Enhancement of penalty - fraudulent availment of CENVAT Credit - premises taken on lease, genuine or not - also, the address declared in the registration certificate was not genuine - HELD THAT - The respondent had obtained the dealer registration from the Department. After necessary investigation by the Department, it was noticed that the address declared in the registration certificate was not genuine. Accordingly, the invoices issued by the respondent dealer were held to be invalid. Consequently, on adjudication, penalty was imposed on the dealers-respondent and also imposed on the second stage dealers, who had purchased the goods from the Respondent and issued invoices to the manufacturers. The respondents are first stage dealers and it is the only evidence against the respondent that the premises declared by them being taken on lease, found to be not genuine when contradictions were noticed relating to the Rent Agreement. Accordingly, it is presumed that the goods in question purchased by them and CENVAT Credit ultimately passed on to the second stage dealer/manufacturer could not also be genuine. There is no conspiracy theory established by the Revenue involving the manufacturer of inputs, and first stage dealer/ second stage dealer and the end user manufacturer of the inputs involving the respondent. The Commissioner imposed penalty when contradictions were noticed in the declaration filed for obtaining Dealer s Registration and also the quantum of penalty accordingly determined. Since no other evidence has been brought on record by the Revenue to establish any complicity on the part of the respondent, the impugned order does not warrant any interference - Appeal dismissed - decided against Revenue.

Summary

Issues:
- Appeal against Order-in-Original imposing penalty under Central Excise Rules for fraudulent CENVAT Credit passing.
- Validity of penalty imposed on first stage dealer and second stage dealers.
- Allegations of mis-declaration of premises and retrospective cancellation of dealer's registration.
- Argument for enhancement of penalty by Revenue.
- Contention regarding sustainability of penalty imposition in law.
- Examination of evidence and determination of penalty adequacy.

The judgment pertains to an appeal filed by the Revenue against an Order-in-Original imposing penalties under Central Excise Rules for fraudulent passing of CENVAT Credit amounting to ?4,54,78,535/- by the respondents, who were first stage dealers of Iron & Steel products. The Commissioner imposed a penalty of ?8.00 lakhs on the respondents and other second stage dealers, prompting the Revenue to appeal for penalty enhancement.

The Revenue argued that the respondents mis-declared their premises, leading to the retrospective cancellation of their dealer registration, rendering the invoices for CENVAT Credit passing illegal. The Revenue sought an increase in the penalty due to the substantial amount of credit passed by the respondents.

The respondents contended that the Department's conclusion was based on a lack of storage facilities at their office premises, and they highlighted the amendment to Rule 26 of the Central Excise Rules in 2007, questioning the sustainability of the penalty imposition. They argued that discrepancies in the Rent Agreement did not invalidate the invoices issued.

Upon review, the Tribunal found that the dealer registration obtained by the respondents was based on a non-genuine address, leading to the invalidation of their invoices. However, the Tribunal noted the absence of evidence establishing a conspiracy involving the manufacturer, first stage dealer, second stage dealer, and end-user manufacturer. The Tribunal upheld the penalty imposed by the Commissioner, deeming it adequate based on the evidence presented.

Ultimately, the Tribunal dismissed the Revenue's appeal, as no additional evidence was provided to prove the respondents' complicity beyond the discrepancies in the dealer registration. The judgment emphasized the lack of a conspiracy theory and upheld the penalty imposed, concluding that the appeal lacked merit.

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