2018 (5) TMI 772 - AT - Central Excise

Penalty u/r 26 of CER - receipt of invoices without receipt of goods - Held that - penalty u/r 26 can be imposed in two situations. Under subrule (1), the penalty is imposable on the person who deals with the goods which is liable for confiscation - In the present case, it is the case of the department that the appellant has not received the input. Therefore, there is no question of dealing with the goods - penalty under sub-rule (1) of Rule 26 is not applicable. Penalty under sub-rule (2) is imposable only on the person who issues the invoice. The appellant does not fall under the category of the person mentioned in sub-rule (2). The invoice was issued by M/s. Ambe Vaishno Steels Pvt. Ltd. Penalty under Rule 26 can be imposed only on the natural individual person and not on the artificial person or company because the goods is handled by natural living person and not by an artificial entity. Penalty set aside - appeal allowed - decided in favor of appellant.

Summary

Issues: Penalty under Rule 26 of Central Excise Rules

Analysis:
1. Issue: Imposition of penalty under Rule 26 on the appellant.
- The Commissioner imposed a penalty of ?4,80,000 on the appellant for not receiving inputs covered under an invoice from M/s. Ambe Vaishno Steels Pvt. Ltd.
- The appellant argued that Rule 26 penalty is not applicable as they did not deal with the goods and did not issue the invoice.
- Cited judgments to support their argument, emphasizing that Rule 26 penalty can only be imposed on a natural person, not an artificial entity.

2. Judgment Analysis:
- Sub-Issue 1: Applicability of Rule 26(1) penalty.
- Rule 26(1) pertains to dealing with goods liable for confiscation. As the appellant did not receive the input, they did not deal with the goods, making this penalty inapplicable.

- Sub-Issue 2: Applicability of Rule 26(2) penalty.
- Rule 26(2) concerns issuing invoices without delivering goods for fraudulent cenvat credit. As the appellant did not issue the invoice, this penalty does not apply to them.

- Legal Interpretation:
- Rule 26 penalties can only be imposed on natural persons, not artificial entities, as goods are handled by individuals.
- The appellant's case did not meet the criteria for either sub-rule of Rule 26, making the penalty unjustifiable.

3. Conclusion:
- The Tribunal set aside the penalty imposed under Rule 26 on the appellant, allowing the appeal.

This detailed analysis highlights the legal arguments, interpretations, and judgments leading to the Tribunal's decision to overturn the penalty under Rule 26 for the appellant.