2022 (11) TMI 946 - AT - Central Excise

Levy of penalty u/r 26 of Central Excise Rules, 2002 - fraudulent passing of cenvat Credit by the appellant to Shree Balaji Castings - demand based on confessional statements of the witnesses - HELD THAT - As regard the invoice issued by the appellant the statements were recorded from Shri. Subhash Chaudhary, Authorized Representative of Shree Balaji Castings and also of Shri. Anshu Agrawal, Partner of Shree Balaji Castings. It is also observed that statement of Shri. Vijay Khurana of M/s Impex World also recorded. Shri Subhash Chaudhary and Shri. Anshu Agrawal clearly stated that they have received the invoice of M/s Impex world whereas they had not received the goods. It is also observed that details mentioned in the invoices were not capable of transporting the goods for which the cenvat credit was passed on. Therefore, from the discussion and finding which is based on the confessional statements of the witnesses, it is clearly established that the appellant has facilitated by only issuing the invoice without supplying the goods for passing of the fraudulent cenvat credit of Rs 3,93,715/-. Therefore, the appellant was rightly liable for penalty under Rule 26. However, looking to the amount of cenvat credit passed on by the appellant the penalty of 2 Lacs appears to be very harsh - the penalty is reduced from Rs 2 Lacs to Rs. 1 Lac. Appeal allowed in part.

Summary

Issues: Penalty imposition under Rule 26 of Central Excise Rules, 2002 for fraudulent passing of cenvat credit.

Analysis:
1. The appellant contested the penalty imposition, arguing that apart from an error in mentioning the wrong vehicle number, no other offense was committed. The main appellant's case had been resolved under the Sabka Vishwas Scheme. The Adjudicating Authority acknowledged the mistake in the vehicle number but found no other wrongdoing by the appellant.

2. The Revenue contended that the appellant facilitated fraudulent cenvat credit passing by issuing invoices without supplying goods. They cited statements from Shree Balaji Castings representatives admitting to receiving invoices but not goods, indicating the appellant's involvement in the fraudulent activity.

3. The Adjudicating Authority examined statements from various individuals, including Shree Balaji Castings' representatives and Impex World's personnel. It was revealed that Shree Balaji Castings availed cenvat credit without physically receiving goods, leading to the diversion of goods in the local market. Impex World issued incorrect invoices, enabling Shree Balaji Castings to fraudulently claim cenvat credit.

4. The Tribunal analyzed the confessional statements of witnesses, confirming that the appellant's issuance of invoices without goods supply facilitated fraudulent cenvat credit of Rs. 3,93,715. While upholding the penalty imposition under Rule 26, the Tribunal deemed the original penalty of Rs. 2 Lacs excessive and reduced it to Rs. 1 Lac, considering the amount of cenvat credit involved.

5. Ultimately, the Tribunal partially allowed the appeal, modifying the penalty amount to Rs. 1 Lac from the initial Rs. 2 Lacs, based on the established facilitation of fraudulent cenvat credit passing by the appellant.