2017 (3) TMI 362 - AT - Central Excise

Imposition of penalties u/r 173Q of the CER, 1944 - fake invoices - Held that - No cross examination was granted to the appellant. It is nowhere has been investigated from where the goods received by the appellant or no investigation conducted in the premises to ascertain whether the appellants are maintaining the proper stock of the goods tallying with the statutory records. In that circumstance, it is very difficult to rely on the statement made by the third party that the appellants were involved in the activity of issuing fake invoices - merely on the basis of statement of the transporter, the penalty on the appellants cannot be imposed u/r 173Q of the CER, 1944. The penalty u/r 173Q cannot be invoked unless and until the appellant have dealt with such goods during the impugned period. Admittedly, it is allegation against the appellants that they have dealt with issuance of bogus invoices - the penalty u/r 173Q of the CER, 1944 is not imposable. Penalty set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Imposition of penalties under Rule 173Q of the Central Excise Rules, 1944 based on the issuance of fake invoices.
2. Validity of penalties on the appellants for their involvement in issuing invoices to a particular entity.
3. Applicability of penalty under Rule 173Q on the appellants without proper investigation and cross-examination.

Analysis:
1. The case involved penalties imposed on the appellants under Rule 173Q of the Central Excise Rules, 1944 for their alleged involvement in issuing fake invoices. The investigation was initiated based on the statement of a third party, Shri R.k.Gupta, who claimed that the appellants were issuing only invoices without actual goods being received. However, the tribunal found discrepancies in the investigation process as no cross-examination was granted to the appellants, and there was no verification of whether the goods were actually received by the appellants. The tribunal concluded that relying solely on the statement of a third party without proper verification was insufficient to impose penalties under Rule 173Q.

2. The issue of penalties on the appellants for their involvement in issuing invoices to M/s.R.K.Enterprises was raised. The tribunal noted that the case against the manufacturers/buyers who availed cenvat credit based on the appellants' invoices had been set aside in a previous order. Additionally, no proper investigation was conducted at the suppliers' end or regarding the transportation of goods. The tribunal highlighted the lack of cross-examination granted to the appellants and concluded that without concrete evidence or proper investigation, the penalties on the appellants were not justified.

3. The tribunal referred to a judgment by the Hon'ble Punjab and Haryana High Court, emphasizing that penalties under Rule 173Q cannot be invoked unless the appellants have dealt with the goods during the relevant period. It was observed that the allegation against the appellants was limited to the issuance of fake invoices, and without concrete evidence of their involvement in handling the goods, the penalty under Rule 173Q could not be imposed. The tribunal further highlighted the lack of investigation at the supplier and transporter's end, leading to the conclusion that the penalties on the appellants were not warranted.

In conclusion, the tribunal set aside the penalties imposed on the appellants and allowed the appeals, emphasizing the importance of proper investigation, cross-examination, and concrete evidence before imposing penalties under Rule 173Q of the Central Excise Rules, 1944.