2018 (1) TMI 471 - AT - Central Excise

Penalties - CENVAT credit - LRs used for transportation which were found fake and bogus and transportation was not done - Held that - for the purpose of penalizing the appellant, no investigation was carried out against the appellant such as, neither any statement was recorded nor any document was recovered from the appellant s premises. In such case, without carrying out any investigation, the person cannot be implicated for making any charge against the person. Only on the basis that the appellants were not interrogated without any investigation against them, they are not liable for penalty either under Rule 25(1)(d) or Rule 26(2) of the CER, 2002 - Appeal allowed.

Summary

Issues:
Appeal against penalty imposed under Rule 25(1)(d) and Rule 26(2) of Central Excise Rules, 2002 read with Section 11AC (1)(b) based on fake transport Lorry Receipts (LR) and alleged non-transportation of goods by the appellant.

Analysis:
The case involved two appeals against Orders-in-Appeal passed by the Commissioner (Appeals) imposing penalties under Rule 25(1)(d) and Rule 26(2) of the Central Excise Rules, 2002. The appellants, second stage dealers, were accused of purchasing goods from a first stage dealer using fake and bogus transport Lorry Receipts (LR). The investigation alleged that the goods were not transported to the appellants, and show-cause notices were issued. The Director of the first stage dealer provided statements, and penalties were imposed on the appellants by the adjudicating authority. The appellants appealed the decision.

The appellant's counsel argued that no investigation was conducted at their end, no statements were recorded, and no documentary evidence was recovered from them. They contended that without proper investigation and evidence, the appellants should not be penalized. The counsel cited relevant judgments to support their argument.

The Revenue, represented by the Assistant Commissioner and Superintendent, supported the findings of the impugned order, reiterating the allegations against the appellants.

After considering both sides' submissions, the Member (Judicial) found that no investigation was carried out against the appellants, and no statements or documents were obtained from them. The basis for penalizing the appellants was the fake LRs used for transportation. The Member emphasized that without proper interrogation and evidence gathering, no charges could be established against the appellants. Therefore, the show-cause notices lacked a basis specifically related to the appellants and were deemed unsustainable. Consequently, the penalties imposed on the appellants under Rule 25(1)(d) and Rule 26(2) were set aside, and the appeals were allowed.

In conclusion, the judgment focused on the lack of investigation and evidence against the appellants, emphasizing the necessity of proper interrogation and supporting evidence before imposing penalties. The decision highlighted the importance of due process and the requirement for a solid basis to hold individuals liable for alleged violations.