2018 (6) TMI 784 - AT - Central Excise

Penalty u/r 26 of CER - allegation against the appellants are that they have facilitated the fraudulent availment of Cenvat credit to the main noticee viz. M/s Ujala Electricals Ltd. - period involved in this case is from 2005-2006 to 2008-2009 - Held that - The penal provision under sub-rule 2 of Rule 26 was not there in existence for the period 2005-2006 and 2006-2007 and only available for the period after 1.3.2007 - the penalty cannot be imposed for the period prior to 1.3.2007, the date on which sub-rule (2) was inserted in Rule 26 of Central Excise Rules, 2002 vide Notification No. 8/2007-CE(NT) dated 1.3.2007 for issuing invoices without delivery of goods and also for abetting in issuing such invoices. These aspects need to be relooked into by the ld. Adjudicating authority - appeal allowed by way of remand.

Summary

Issues:
Imposition of penalty under Rule 26 of Central Excise Rules for fraudulent availment of Cenvat credit by M/s Ujala Electricals Ltd.

Analysis:
The judgment pertains to four appeals filed against a common adjudication order imposing penalties on the appellants for facilitating fraudulent availment of Cenvat credit by M/s Ujala Electricals Ltd. The penalties ranged from ?25 lakhs to ?30 lakhs for each appellant. The appellant's advocate argued that crucial evidence, such as ledgers, was not considered by the adjudicating authority. Additionally, the advocate highlighted discrepancies in the investigation and lack of financial flow evidence between the appellants and M/s Ujala Electricals Ltd. The advocate also pointed out the absence of sub-rule 2 in Rule 26 for the relevant period before 1.3.2007, citing legal precedents to support the argument that penalties cannot be imposed prior to the existence of this sub-rule.

The Departmental Representative (DR) reiterated that the invoices issued by the appellants facilitated the wrongful availment of Cenvat credit by M/s Ujala Electricals Ltd. After hearing both parties and reviewing the case record, the Tribunal focused on the key issue of penalty imposition under Rule 26 of the Central Excise Rules. The judgment emphasized that sub-rule 2 of Rule 26 was not in existence for the relevant period before 1.3.2007, and penalties cannot be imposed retroactively. The Tribunal agreed with the appellant's argument that crucial evidence like ledgers was not adequately considered and emphasized the need for a reevaluation by the adjudicating authority. Consequently, the Tribunal allowed the appeals by way of remand for further review and consideration based on the legal and factual aspects discussed during the proceedings.

In conclusion, the judgment highlights the importance of proper consideration of evidence, legal provisions, and precedents in cases involving penalty imposition under the Central Excise Rules. It underscores the necessity for a thorough examination of all relevant factors before imposing penalties, especially in instances where legal provisions have undergone amendments impacting the applicability of penalties for specific periods. The decision to remand the appeals signifies the Tribunal's commitment to ensuring a fair and just adjudication process based on a comprehensive assessment of all pertinent aspects of the case.