2024 (7) TMI 1252 - AT - Central Excise

Levy of Penalty u/r 26(2) of the Central Excise Rules, 2002 - it is alleged that the second stage dealers based in Jaipur were issuing cenvatable invoices to M/s. Amar Pratap Steel Pvt. Ltd. (main noticee) APSPL without delivering the goods - goods purchased from the first stage dealers and manufactured by non-existent or non-working manufacturers - HELD THAT - In the given factual situation of the case, categorical findings have been recorded by the Commissioner (Appeals) in the case of APSPL, particularly that APSPL had duly received the goods as mentioned in the impugned invoices after making payment of duty, there is no justification in taking a contrary view on the same fact, which have been accepted by the Department and no appeal has been filed to challenge the same. In the circumstances, there is no reason to differ with the said order insofar as the appellant is concerned, who has been saddled with penalty of Rs.3,63,778/- under the Rule. When the demand in respect of the cenvat credit itself is not maintainable, there is no justification to affirm the penalty imposed on the appellant. In the case of Drolia Electrosteel P. Ltd. 2023 (11) TMI 10 - CESTAT NEW DELHI , Learned Division Bench of this Tribunal was dealing with an identical situation, where the cenvat credit was denied and penalty was sought to be imposed on the allegations that DGCEI had investigated several manufacturers and traders including those who supplied the invoices, where the manufacturers indicated, either did not exist at all or had only supplied the documents to enable the manufacturers of the final products to take cenvat credit without actually supplying the goods. Following the principles enunciated by the Division Bench in the case of M/s. Drolia Electrosteel P.Ltd., which is binding on me and also in the given circumstances, when the department has accepted the findings as recorded by the Commissioner (Appeals) in the order dated 11.12.2019, there is no justification to uphold the imposition of penalty on the appellant. The impugned order, therefore, deserves to be set aside - The appeal is accordingly allowed.

Issues:
1. Penalty imposed under Rule 26(2) of the Central Excise Rules, 2002 affirmed.
2. Recovery of cenvat credit from the main noticee along with interest and penalty.
3. Imposition of penalties on all parties involved.
4. Appeal rejection against the penalty imposed on the appellant.
5. Challenge of the order-in-original by the main noticee resulting in a favorable order-in-appeal.
6. Lack of challenge by the department against the favorable order-in-appeal.
7. Categorical findings in the case of the main noticee regarding receipt of goods and payment of duty.
8. Justification of penalty imposition on the appellant in light of accepted findings.
9. Comparison with a similar case leading to the setting aside of the penalty.

Analysis:
1. The Appellate Tribunal upheld the penalty imposed under Rule 26(2) of the Central Excise Rules, 2002, on M/s. Balaji Steels for passing cenvat credit based on fraudulent invoices showing non-existent manufacturers. The investigation revealed a chain of transactions involving first and second stage dealers issuing invoices without actual delivery of goods, leading to a substantial cenvat credit amount.

2. A show cause notice was issued to manufacturers, first stage dealers, and second stage dealers, with the main noticee directed to recover cenvat credit along with interest and penalty. Penalties were imposed on all parties under Rule 26 of the Rules, with the appellant facing a penalty of Rs.3,63,778.

3. The appellant's appeal against the penalty was rejected, despite challenging the original order. The appellant argued that the main noticee's successful appeal should have a bearing on their case, as the department did not challenge the favorable order, leading to finality.

4. The Commissioner (Appeals) found in the main noticee's case that goods were received as per invoices, duty was paid, and no objections were raised by the department regarding the transactions. The appellant contended that since the findings were accepted by the department without challenge, the penalty on them was unjustified.

5. The appellant cited Tribunal decisions supporting their position, emphasizing the need for corroborative evidence in demand proceedings. The appellant relied on the main noticee's case findings to argue against the penalty imposition, highlighting the lack of justification due to accepted facts.

6. Referring to a similar case, the Tribunal ruled in favor of the appellant, setting aside the penalty based on the principles established in the precedent case. The Tribunal concluded that in the absence of challenges to accepted findings, the penalty on the appellant was unwarranted.

7. The Tribunal allowed the appeal, setting aside the penalty imposed on the appellant, emphasizing the binding nature of the precedent case's principles and the department's acceptance of the main noticee's case findings. The decision was pronounced on 23rd July 2024.

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