2022 (8) TMI 495 - AT - Central Excise

Absolute Confiscation - cash seized from the residential premise of Director of M/s PML and from the residence of alleged broker/agent for cenvatable invoices - levy of penalty u/r 26 of the Central Excise Rules 2004 invoking the provision of Section 121 of the Customs Act, 1962 - HELD THAT - The application of Rule is inescapably linked to dealing in goods where the concerned person should have reasons to believe that the same are liable for confiscation. In this case, it is found that the main allegation of the Department is that the respondents M/s PML have availed CENVAT credit only on the basis of forged/doctored documents like invoices without purchasing, receiving or utilizing the material in the manufacture of their final product i.e. steel rolling machine . There is certain contradiction in the approach of the Department. On the one hand the Department s allegation is that there is no movement of goods and on the other hand seeks to impose penalty on the appellants for dealing with goods in an illegal manner - Such logic is not acceptable. The provisions of Rule 26 have not been satisfied to impose penalties. The learned Adjudicating Authority has found that the respondents herein have duly accounted for the cash seized from their premises and as they have not dealt in any manner with the goods that can be held liable for confiscation, no penalty is imposable on them. When two authorities of the Department i.e. the Adjudicating Authority as well as the Appellate Authority have given categorical findings against the allegations made in the show cause notice giving cogent reasons, the Department is attempting to take the issue back to the beginning by filing these appeals. The Department has not made any case for confiscation of cash seized from the premises of Shri Gurmeet Singh and Shri Preet Singh regarding seizure of case of Rs.17 lakh. The Adjudicating Authority as well as the Appellate Authority have convincingly rejected the contention made in the show cause notice and therefore, there are no reasons as to why the impugned order needs to be interfered with - Appeal dismissed - decided against Revenue.

Summary

Issues Involved:
1. Early hearing and stay application by the Revenue.
2. Allegation of fraudulent availing of CENVAT credit by M/s PML.
3. Confiscation of unaccounted cash seized from the premises of M/s PML's Chairman and a broker.
4. Imposition of penalties under Rule 26 of the Central Excise Rules, 2004.

Detailed Analysis:

1. Early Hearing and Stay Application by the Revenue:
The Revenue filed a miscellaneous application seeking early hearing of the appeal and a stay on the impugned order. The Tribunal accepted the application for early hearing but dismissed the stay application as infructuous, deciding to take up all connected appeals together for final hearing.

2. Allegation of Fraudulent Availing of CENVAT Credit by M/s PML:
The Department, based on intelligence, alleged that M/s PML fraudulently availed CENVAT credit on the basis of invoices without actual receipt of material. Raids conducted at various premises led to the discovery of unaccounted cash. Statements from individuals involved, including admissions of fraudulent activities, were recorded. However, the Adjudicating Authority dropped the proceedings against M/s PML and associated individuals, a decision upheld by the Commissioner (Appeals). The Department's appeal contended that the lower authorities did not properly consider the facts and misapplied case laws regarding the retraction of statements.

3. Confiscation of Unaccounted Cash Seized:
The Department sought the absolute confiscation of cash seized from the residential premises of M/s PML's Chairman and a broker. The respondents argued that the cash was accounted for and provided evidence such as bank withdrawal records and ledgers. The Adjudicating Authority found the cash to be accounted for and not liable for confiscation. The Tribunal noted that the Department's logic was contradictory, as it alleged no movement of goods while seeking penalties for dealing with goods illegally. The Tribunal upheld the findings of the Adjudicating and Appellate Authorities that the seized cash was not linked to the sale of excisable goods and thus not subject to confiscation under Section 121 of the Customs Act, 1962.

4. Imposition of Penalties under Rule 26 of the Central Excise Rules, 2004:
The Department sought to impose penalties under Rule 26, which applies to dealing with excisable goods liable for confiscation. The Tribunal found that the main allegation was the fraudulent availing of CENVAT credit without actual receipt of goods, not dealing with goods liable for confiscation. The Tribunal noted that the respondents had accounted for the seized cash and had not dealt with any goods liable for confiscation. The Adjudicating Authority's detailed findings were upheld, and the Tribunal found no grounds to interfere with the impugned order.

Conclusion:
The Tribunal concluded that the Department had not made a case for the confiscation of the seized cash or the imposition of penalties. The miscellaneous application for early hearing was allowed, the stay application was dismissed as infructuous, and all four appeals filed by the Revenue were dismissed. The Tribunal pronounced the order in the open court on 10 August 2022.