2023 (8) TMI 405 - AT - Central Excise

Penalty u/r 26(2)(ii) of Central Excise Rules, 2002 - penalty was imposed under rule 26(2)(ii) of Central Excise Rules, 2002, which came into effect only on 01.04.2007, whereas the period in the present case is 2005-06 - HELD THAT - Even though in the operating portion of the order, the penalty was imposed under Rule 26, but in the concluding finding in respect of all the appellants, it is clearly stated that they are liable for penalty under rule 26(2)(ii) of Central Excise Rules, 2002. Therefore, there is no doubt that the penalty was imposed under Rule 26(2)(ii) of Central Excise Rules, 2002. In the present case the period involved is 2005-06 Rule 26(2)(ii) was inserted vide Notification No.8/2007-CE(NT) dated 01.03.2007 (effective from 01.04.2007), therefore, the provision of Rule 26(2)(ii) cannot be made applicable retrospectively for the period prior to 01.04.2007. For this reason alone the penalties imposed on the appellants are not sustainable. From the reading of the Rule, it can be seen that a person can be penalized under this rule, only if he is involved in various activities of handling of goods, which are liable for confiscation. In the present case the entire case of the department is that there is no movement of goods but it is a paper transaction and the M/s Nitin Global Ltd, who has taken Cenvat credit, has not received the goods. When this is the case of the department as no goods is involved, consequently, none of the appellants are engaged in handling the goods which is liable for confiscation. As regard the appellant, Shri Rakesh Kumar Gupta, who is the director of the importer company, they have sold the goods on the high sea sale basis, therefore, they are not involved in facilitating the fraudulent Cenvat credit to M/s Nitin Alloys India ltd and even he cannot be implicated as he is not involved in any goods which is liable for confiscation. As regard the Delight Cargo Carries, they are the transporter and as per the charge of the department they have not transported the goods. Even for this reason also when the transporter has not handled the goods, there is no goods liable for confiscation. As regard the appellant Qumaruzzama Khan, he is the owner of the CHA Agency, whose job is only to clear the customs goods and for this role it cannot be said that the appellant is involved in any fraudulent passing of the Cenvat credit. On the various counts, the appellant are not liable for penalty under Rule 26 of Central Excise Rules, 2002. The penalties are set aside and appeals are allowed.

Summary

Issues involved:
The imposition of penalty under Rule 26 in connection with facilitating fraudulent Cenvat credit to another company without receipt of goods.

Summary:

Issue 1: Retrospective Application of Penalty Rule
The penalty was imposed under Rule 26(2)(ii) of Central Excise Rules, 2002, which came into effect on 01.04.2007, while the period in question was 2005-06. The appellant argued that the penalty is not sustainable as Rule 26(2)(ii) cannot be applied retrospectively. They cited precedents to support their claim.

Issue 2: Applicability of Rule 26
The appellants contended that none of their actions fall under the unamended Rule 26. The Tribunal noted that the penalty was imposed under Rule 26(2)(ii) and that this provision could not be applied retrospectively to the period prior to 01.04.2007.

Issue 3: Interpretation of Rule 26
The Tribunal analyzed the language of Rule 26, which penalizes individuals involved in handling goods liable for confiscation. As the case involved a paper transaction without actual movement of goods, the appellants were found not to be engaged in activities covered by the rule.

Judgment:
The Tribunal found that the penalties imposed on the appellants were not sustainable due to the retrospective application of Rule 26(2)(ii) and the lack of involvement in activities covered by Rule 26. The penalties were set aside, and the appeals were allowed.

*(Pronounced in the open court on 02.08.2023)*