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2023 (5) TMI 602 - AT - Central ExciseLevy of penalty personal penalty on Broker u/r 26 of CER - Abetment in availment of inadmissible CENVAT Credit - credit availed without any manufacturing activity and without removing any finished excisable goods - suppression of facts and wilful misstatement - HELD THAT - The rule has two parts; first part is not relevant for our purpose as the show cause notice has been issued to the appellants herein for abetting in making the invoices on the basis of which the assessee has taken ineligible Cenvat credit. So far as the argument of learned counsel, that no such allegation of abetment has been made in the show cause notice, is concerned, we find same to be not correct as a specific allegation of abetment has been made against the appellants in the show cause - It needs to be seen whether their actions made them liable for penalty under Rule 26(2) ibid. The said clause clearly mentions that any person who issues or abets in making an excise duty invoice without delivery of goods specified therein or issues any other document or abets in making such document on the basis of which the user of said invoice or document is likely to take or has taken any ineligible benefit under the Act or the rules made thereunder like claiming of CENVAT credit under the CENVAT Credit Rules, 2004 or refund, shall be liable to a penalty not exceeding the amount of such benefit or five thousand rupees, whichever is greater. From the perusal of the evidences collected in the form of documents and statement of concerned persons it is clear that the assessee was not in existence at the premises declared in their Central Excise Registration certificate but they managed to obtain the registration on the basis of forged documents for manufacturing Polyester Grey Fabric . They neither purchased any polyester yarn nor ever manufactured any polyester grey fabric. The broker i.e. Mr. Sajjan Tibrewal managed to purchase polyester yarn from the yarn mills in the name of the assessee and supplied invoices to the assessee without accompanying the goods on the basis of which the assessee managed to avail inadmissible Cenvat credit - the cheques were deposited by him with a banking company M/s. Advance Finstock P. Ltd., Malegaon, who after taking commission @0.05%, were issuing cheques in the name of the assessee, the photocopies of which were also found in the records of the assessee. From the statements it has been proved beyond any doubt that the brokers were instrumental in availing of ineligible Cenvat credit by the assessee for payment of central excise duty without manufacturing/ removing any excisable goods and also for passing on the said Cenvat credit to their customers on the basis of the invoices only without supplying any goods to them. This has been established through the ER-1 returns also. Involvement of appellant Sajjan Tibrewal in the fraud has been proved beyond doubt as it has been corroborated by other statements also. He knowingly involved in the fraud as he himself admitted in his statement about his role, retraction of which was much belatedly and was rightly held by the authorities below as afterthought. No doubt there is a complete network in order to defraud the government exchequer - A careful scrutiny of all the statements placed on record, be it the assessee or the transporter or brokers etc. completed the chain of events and proved it beyond any doubt that the appellant Sajjan Tibrewal abetted in making the invoices on the basis of which the assessee has availed ineligible Cenvat Credit without setting up any factory for manufacturing polyester yarn. Penalty on appellant Mr. Pankaj Hari Pansari - HELD THAT - Nowhere it has come in any of the statements that he knowingly given the delivery of yarn received by him to some other persons unrelated to the assessee. His fault was that he did not ensure that the persons who took the delivery of polyester yarn are from the assessee company only and delivered the yarn to the persons whose names and phone numbers have been informed to him in the name of the persons of the assessee, by someone from the yarn company only from time to time and he did not keep the detailed information of those persons who used to take delivery of yarn for the assessee. Unlike appellant Sajjan Mohanlal Tibrewal, Mr. Pankaj Pansari nowhere made any admissions - the department has failed to make any case against the appellant Mr. Pankaj Pansari beyond reasonable doubt. The Appeals are dismissed so far as imposing penalty against the appellant Mr. Sajjan Mohanlal Tibrewal is concerned and the same is set aside qua the appellant Pankaj Hari Pansari by allowing his appeal. Appeal allowed.
Issues Involved:
1. Whether the learned commissioner is justified in confirming the penalty on the appellants under Rule 26 of the Central Excise Rules, 2002. Summary: Issue 1: Confirmation of Penalty under Rule 26 The appeals were filed by brokers challenging the order dated 10.10.2012 by the Commissioner, which confirmed the demand raised in the show cause notice against M/s. Surabhi Corporation for availing ineligible Cenvat credit. The Commissioner also imposed a separate penalty on the brokers under Rule 26 of the Central Excise Rules, 2002. Facts and Allegations: - Investigation revealed that M/s. Surabhi Corporation availed Cenvat Credit of Rs.1,67,84,392/- fraudulently, without any manufacturing activity or removal of excisable goods, and passed on ineligible Cenvat credit to their customers. - The brokers were involved in procuring polyester yarn in the name of the assessee and selling it in the open market, while supplying only invoices to the assessee, enabling them to avail ineligible Cenvat credit. Arguments by Appellants: - The appellants argued that they did not physically deal with the yarn and thus were not liable for penalty under Rule 26, which applies only when excisable goods are physically dealt with. - They relied on the decision of the Larger Bench of the Tribunal in Steel Tubes of India Ltd. vs. CCE, Indore. - The appellants claimed that their statements were recorded under duress and coercion. Arguments by Revenue: - The Revenue argued that the brokers played a pivotal role in diverting polyester yarn and making invoices available to the assessee, thereby abetting the fraudulent availment of input credit. - They supported their arguments with decisions from the Tribunal in similar cases. Tribunal's Analysis: - The Tribunal examined Rule 26, which penalizes any person who issues or abets in making an excise duty invoice without delivery of goods or any document enabling ineligible benefits under the Act. - The Tribunal found that the brokers managed to procure raw materials and supply invoices without goods, enabling the assessee to avail ineligible Cenvat credit. - The Tribunal considered the statements recorded under Section 14 of the Central Excise Act, 1944, which corroborated the involvement of the brokers. Decision: - The Tribunal confirmed the penalty against Mr. Sajjan Mohan Tibrewal, finding his involvement in the fraud proven beyond doubt through corroborated statements and retraction deemed as an afterthought. - The Tribunal set aside the penalty against Mr. Pankaj Hari Pansari, concluding that while he was negligent, no knowledge or motive could be attributed to him, and the department failed to make a case against him beyond reasonable doubt. Conclusion: - The appeal of Mr. Sajjan Mohan Tibrewal was dismissed, confirming the penalty. - The appeal of Mr. Pankaj Hari Pansari was allowed, setting aside the penalty. Pronounced in open Court on 12.05.2023.
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