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2023 (7) TMI 255 - AT - Central ExciseLevy of penalty u/r 26 of Central Excise Rules, 2002 - issuing Cenvat Credit invoices without supplying the goods for fraudulent passing of Cenvat credit - no proper cross examination was conducted by the Adjudicating Authority - principles of natural justice - HELD THAT - Both the appellant have given inculpatory statements. The Adjudicating authority has conducted the cross-examination though some discrepancy was raised by the Learned Chartered Accountant during the hearing before the Adjudication authority but the fact that the cross examination has been conducted and nothing contrary to the statement given under Section 14 of the Central Excise Act, 1994 by the present appellants have come on record. Therefore, both the present appellants have direct involvement in passing of fraudulent Cenvat credit to M/s Nakoda Alloys Pvt. Ltd. The penalty was imposed under Rule 26(2) of Central Excise Rules, 2002 which has come into force with effect from 01.04.2007. Therefore, for all the transactions made prior to 01.04.2007 the Penal Provision Rule 26(2) cannot be applied retrospectively. Therefore, in respect of the transactions only made after 01.04.2007 the penalty under Rule 26(2) of Central Excise Rules, 2002 shall be applicable. In this case no penalty can be imposed under Rule 26(2) of Central Excise Rules, 2002. As regard the appeal of M/s Goodluck Empire some of the transactions were made after 01.04.2007, in respect of these transactions the appellants are liable to penalty under Rule 26(2) of Central Excise Rules, 2002. The penalty of M/s. Goodluck Empire is reduced from Rs. 8,20,000/- to Rs. 2,00,000/- - Appeal allowed in part.
Issues involved: Penalty under Rule 26 of Central Excise Rules, 2002 for issuing Cenvat Credit invoices without supplying goods for fraudulent passing of credit.
Summary: Issue 1: Proper cross-examination and reliance on statements The appellant argued that no proper cross-examination was conducted by the Adjudicating Authority, making the statements unreliable as evidence for imposing the penalty. The main party, M/s Nakoda Alloys Pvt. Ltd., settled their case under the Sabka Vishwas Scheme, 2019. The appellant contended that since the penalty was imposed under Rule 26(2) of Central Excise Rules, 2002, which came into force from 01-04-2007, no penalty can be imposed for transactions prior to this date. The appellant cited relevant judgments to support this argument. Issue 2: Involvement in passing fraudulent credit The Adjudicating Authority found that both appellants had given inculpatory statements and were directly involved in passing fraudulent Cenvat credit to M/s Nakoda Alloys Pvt. Ltd. Despite some discrepancies raised during the hearing, the cross-examination was conducted, and no contradictory evidence to the statements was found. The penalty under Rule 26(2) of Central Excise Rules, 2002 could only be applied to transactions made after 01-04-2007, as per the judgments cited by the appellant. Judgment: After considering the submissions and records, it was observed that M/s Nakoda Alloys Pvt. Ltd. settled their case, while the present appellants issued invoices without supplying goods, leading to fraudulent credit passing. The penalty under Rule 26(2) of Central Excise Rules, 2002 could not be applied retrospectively to transactions before 01-04-2007. As a result, no penalty was imposed on M/s Jenil Empire for transactions prior to this date. However, for M/s Goodluck Empire, some transactions occurred after 01-04-2007, leading to a reduced penalty from Rs. 8,20,000 to Rs. 2,00,000. The appeal of M/s Jenil Empire was allowed, and the appeal of M/s Goodluck Empire was partly allowed. *(Pronounced in the open court on 05.07.2023)*
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