2016 (12) TMI 82 - AT - Central Excise

Imposition of penalty under Rule 209A of Central Excise Rules 1944 - clandestine removal of goods - forged invoices - appellant is involved in issuance of fake gate passes and on the basis of which the fraudulent modvat credit was passed on, whether on this basis penalty u/r 209A is attracted or not? - Held that - From the plain reading of the Rule 209, the person can be liable for penalty only when he acquires possession of, or is in any way concerned in transporting, removing, depositing, keeping, concealing, selling or purchasing or in any other manner deals with, any excisable goods which he knows or has reason to believe are liable to confiscation under the Act or these Rues. In the facts of the present case, fake gate passes were issued but no excisable goods were supplied, therefore the dealing of the goods, in particular excisable goods is not involved. The appellant has not involved in the act as mentioned under Rule 209A such as transporting, removing, depositing, keeping, concealing, etc. of any excisable goods which are liable for confiscation. Since no goods were involved the question of dealing with the goods and the confiscation thereof is not involved. Under Rule 209A penalty cannot be imposed on the appellant for the offence committed. We observe that in the new Central Excise Rules 2002, Rule 26 is pari materia to Rule 209A, when it was realized by the Government that offence of the similar nature of the present case are also occurring for extending the fraudulent benefit by way of fake documents, the legislators have conciously inserted Sub-rule (2) in Rule 26 to bring the present offence under the ambit of penal provision. Since the provision similar to Sub-Rule (2) of Rule 26 was neither existing in Rule 26(1) nor in Rule 209A of Central Excise Rules 1944, the provision of Sub-Rule (2) cannot be made applicable prior to 1.3.2007 when Sub-Rule (2) was inserted - the penalty imposed under Rule 209A on the appellant is not sustainable, therefore the penalty is set aside - appeal allowed - decided in favor of appellant-assessee.

Summary

Issues:
Whether the appellant is liable for penalty under Rule 209A of the Act.

Analysis:
The case involves the appellant, a director of a company, who issued cenvatable invoices/certificates without supplying the material, based on alleged fake and forged gate passes for MS Scrap. The penalty under Rule 209A of Central Excise Rules 1944 was imposed. The appellant challenged the Order-in-Original, arguing that the penalty cannot be imposed as no excisable goods were involved. The appellant's CA cited case laws to support this argument, emphasizing that the penalty under Rule 209A applies only when dealing with excisable goods liable for confiscation.

The Revenue, represented by the Supdt. (A.R.), supported the impugned order and cited relevant judgments to counter the appellant's arguments. The Tribunal considered both sides' submissions and analyzed the applicability of Rule 209A. The Tribunal noted that the rule imposes a penalty when dealing with excisable goods liable for confiscation, which was not the case here as no excisable goods were involved. The Tribunal highlighted the absence of provisions similar to Sub-Rule (2) in Rule 209A prior to 1.3.2007, which would have covered the present offense. The Tribunal distinguished the facts of the case from the judgments cited by the Revenue.

The Tribunal referenced its previous decisions where penalties under Rule 209A were dropped for co-noticees in similar circumstances. Citing a specific case, the Tribunal upheld the appellant's argument that the penalty cannot be imposed without goods being held liable for confiscation. Relying on the Bombay High Court judgment and the Tribunal's past rulings, the Tribunal concluded that the penalty imposed on the appellant under Rule 209A was not sustainable. Consequently, the penalty was set aside, and the appeal was allowed. The Tribunal also disposed of the stay application in favor of the appellant.

In conclusion, the Tribunal's detailed analysis focused on the interpretation of Rule 209A in the context of the case's facts and legal precedents. By considering the absence of excisable goods and the specific provisions of the rule, the Tribunal determined that the penalty imposed on the appellant was not justified. The decision was aligned with the Bombay High Court judgment and the Tribunal's consistent approach in similar cases, leading to the setting aside of the penalty and allowing the appeal.