2020 (3) TMI 310 - AT - Central Excise

Imposition of penalty u/r 26 of CER - cenvat credit availed on inputs without physically receiving the goods - penalty has been imposed on the basis of third party evidence i.e. the statement of transporter and none of the transporter was called for examination in chief and no cross examination was granted to the appellant. Penalty imposed on Neeraj Thakur - HELD THAT - The penalty has been imposed being Director of M/s VKM Electricals Limited. It is a fact on record that the appellant was mere Director of that company but was not looking after the business affairs of that company. It has been revealed from the facts of the case as Shri V. K. Madan in his statement admitted that he was looking after affairs of the company - Admittedly, no efforts has been made by the Revenue to find out the role of the appellant for availing fraudulent cenvat credit by M/s UEL - the penalty on Neeraj Thakur is not imposable. Penalties imposed on Lalit Thakuria, Ajay Goel and Anant Bomb - HELD THAT - The appellants are C F agents to clear the goods to UEL of different suppliers. It has been alleged that goods have not delivered to UEL on the basis of the statement of the transporters recorded during the course of investigation. No physical verification was conducted at the premises of the appellants. Moreover, the statement of the transporters have been relied upon who have never called for examination in chief. Therefore, penalties have been imposed on the appellants on the basis of the statement of the transporter and records recovered from the premises of UEL are not sustainable - penalties set aside. Further, no other corroborative evidence has been brought on record that the appellant have not supplied the goods to UEL. The impugned order qua imposition of penalty on all the appellants is set aside - Appeal allowed - decided in favor of appellant.

Summary

Issues:
Imposition of penalty under Rule 26 of Central Excise Rules, 2002 on the appellants for fraudulent availment of cenvat credit by M/s Ujala Electricals Ltd.

Analysis:

1. Background of the Case:
The case involved a search conducted at the premises of M/s Ujala Electricals Limited, M/s VKM Electricals Limited, and the Chief Advisor of these units. The appellant, a Director of VKM, along with other C&F agents, faced penalties for allegedly availing cenvat credit without physically receiving goods. The matter was adjudicated, leading to penalties imposed on the appellants.

2. Contentions of the Appellants:
- The appellant Neeraj Thakur claimed to be a dummy Director not involved in the company's operations, citing a High Court decision requiring actual involvement for penalty imposition.
- Other appellants argued that penalties were based on third-party evidence without proper examination or corroborative evidence of non-delivery of goods.

3. Arguments of the Respondent:
The authorized representative for the respondent supported the impugned order, which imposed penalties on the appellants.

4. Tribunal's Directions and Observations:
- The Tribunal highlighted the issue of penalty imposition under Rule 26 for fraudulent cenvat credit availed by M/s Ujala Electricals Ltd. It noted the absence of the penal provision for certain periods and the necessity to consider crucial evidence like ledgers.
- The Tribunal found that the penalty on Neeraj Thakur, as a Director, was not justified due to lack of actual involvement in the fraudulent activities, as per established legal principles.
- Regarding penalties on other appellants, the Tribunal emphasized the reliance on transporter statements without proper examination, leading to penalties being set aside due to insufficient evidence.

5. Decision and Outcome:
The Tribunal set aside the impugned order imposing penalties on all the appellants, providing consequential relief. The penalties on Neeraj Thakur and other C&F agents were deemed not imposable due to lack of concrete evidence supporting the allegations.

In conclusion, the judgment by the Appellate Tribunal CESTAT NEW DELHI addressed the issue of penalty imposition under Rule 26 of the Central Excise Rules, 2002, emphasizing the need for substantial evidence and actual involvement to penalize individuals. The decision highlighted the importance of proper examination of evidence and adherence to legal principles in imposing penalties related to fraudulent activities like cenvat credit availment.