2022 (7) TMI 713 - AT - Central Excise

Levy of penalty - fraudulent passing of CENVAT Credit - in the LR the destination was shown as Daman/Silvassa whereas the goods were admittedly delivered at Bhiwandi - HELD THAT - The penalty under Rule 26 was imposed upon the appellant for an amount of Rs. 3 Lakh on the alleged charge that the appellant being transporter has issued an incorrect LR knowingly showing the destination Daman/Silvassa but the goods were delivered at Bhiwandi. It is found that the adjudicating authority imposed the penalty on the ground that the appellant dealt with the goods which were liable for confiscation. From the plain reading of Rule 26 it is clear that the appellant s offence falls under Rule 26 (2)(ii) of Central Excise Rules, 2002 as the appellant had issued incorrect LR in respect of goods on which the fraudulent credit was availed by M/s. Taha wires. The aforesaid amended Rule 26 came into effect from 01.04.2007 whereas in the present case period involved is 2004-2005, 2005-2006, 2006-2007 (upto December, 2006) - Since the appellant s case falls under Rule 26 (2) (ii) but the same is not existing at the relevant time the appellant cannot be penalized when the goods dealt with by him was not liable for confiscation on the ground that the same was admittedly duty paid. The penalty is not sustainable hence, the same is set aside - Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Imposition of penalty on transporter for alleged fraudulent credit availed by another company.
2. Applicability of Rule 26 for penalty under Central Excise Rules, 2002.
3. Interpretation of Rule 26 in the context of goods not liable for confiscation.

Analysis:
1. The case involved the imposition of a penalty of Rs. 3 Lakh on a transporter for transporting goods in relation to which a company had availed fraudulent credit without actually receiving the goods. The company's appeal was dismissed earlier, leading to the transporter filing the present appeal against the penalty.

2. The Learned Superintendent representing the Revenue argued that the penalty was rightly imposed as the transporter had issued a consignment note showing the wrong destination, leading to the penalty. However, the Member (Judicial) carefully considered the submissions and records. The penalty was imposed under Rule 26, which pertains to certain offences related to excisable goods.

3. The Member analyzed the relevant Rule 26 applicable during the period in question (2004-2007) and noted that the penalty was based on the transporter's involvement with goods liable for confiscation. However, as per the rule, only goods liable for confiscation can lead to penalties for those dealing with them. In this case, the goods were duty paid and not liable for confiscation, rendering the penalty unjustified.

4. The Member further compared the original Rule 26 with the amended version effective from 01.04.2007, which specifically addressed situations like the one in the present case, where incorrect documentation led to ineligible benefits being availed. Despite the transporter's actions falling under the amended rule, the Member emphasized that the rule in force during the relevant period did not cover such scenarios.

5. Consequently, the Member found that the penalty imposed on the transporter was not sustainable under the prevailing rules. The penalty was set aside, and the appeal was allowed in favor of the transporter. This decision was made based on the clear interpretation of the rules and the absence of grounds for penalizing the transporter for goods that were not subject to confiscation.

This detailed analysis of the issues and the application of relevant legal provisions led to the setting aside of the penalty imposed on the transporter in this case.