2024 (11) TMI 1342 - AT - Central Excise

Levy of penalties - wrong availment of CENVAT credit based on fraudulent invoices without receiving goods by the assessee - HELD THAT - Evidently, Rule 26(2) of the Central Excise Rules provides for imposing penalty on any person who either issues an excise duty invoice without delivery of goods specified therein or abets in making any such an invoice or any other document or abets in making any such document on the basis of which a user of the invoice or the document is likely to take or has taken ineligible benefit under the Act or Rules. In this case, the allegation in the SCN as well as affirmation in the impugned order is that the assessee had taken CENVAT credit on the strength of fraudulent invoices issued by M/s Ridhi Sidhi without supplying of the goods - The role of Shri Prem Jain is as the Director of the assessee and the role of Shri Gyan Jain is as the General Manager of the assessee. Neither the assessee nor Shri Prem Jain nor Shri Gryan Jain have either issued invoices or abetted issuing of the invoices according to the show cause notice or the impugned order. Therefore, Shri Prem Jain and Shri Gyan Jain are not covered by Rule 26 (2). Rule 15A of CCR, provides for penalty for violations of CCR not elsewhere specified. The CCR provide for availment of CENVAT credit by an assessee subject to some conditions and after following certain procedures. If there are violations of CCR, they can be violations by the assessee - There is also no provision for imposing penalty upon the Director or the General Manager or other functionary of assessee under the CCR. Rule 15A of CCR, therefore, also does not apply to the Director or General Manager of the assessee. Thus, neither Rule 26 (2) of Central Excise Rules, 2002 nor Rule 15A of CCR under which the penalty was imposed on Shri Prem Jain and Shri Gyan Jain apply to the facts of this case. The penalty imposed on them cannot be sustained as it is imposed without any authority of law - It also needs to be pointed out that while penalties were imposed under two different Rules Rule 26(2) of the Central Excise Rules and Rule 15A of CCR the quantum of penalty imposed under each of them has also not been indicated in the order of the Additional Commissioner which was upheld by the impugned order by the Commissioner (Appeals). The impugned order is set aside insofar as it relates to the penalties imposed on Shri Prem Jain and Shri Gyan Jain - Appeal allowed.

Summary

Issues:
1. Appeal against penalties imposed on individuals for CENVAT credit denial.

Analysis:
The judgment pertains to two appeals challenging penalties imposed on individuals for CENVAT credit denial. The impugned order upheld penalties imposed on Shri Prem Jain and Shri Gyan Jain by the Additional Commissioner, which were confirmed by the Commissioner (Appeals). The penalties were imposed under Rule 15A of CCR and Rule 26(2) of the Central Excise Rules, based on allegations of availing CENVAT credit on fraudulent invoices without receiving goods. The appellants contested the penalties on three grounds, arguing that the credit was rightfully availed, Rule 26(2) did not apply to them, and Rule 15A did not allow penalties on directors/general managers.

The Tribunal examined the grounds raised by the appellants. It was noted that the issue of fraudulent credit availing was not under consideration in the appeals, as the impugned order had already established the inadmissibility of the credit. Regarding Rule 26(2) penalties, it was clarified that the appellants, as director and general manager, did not issue or abet the issuance of fraudulent invoices, thus not falling under the purview of the rule. Similarly, Rule 15A penalties were deemed inapplicable to the appellants as CCR violations are attributed to the assessee, not its functionaries. Consequently, the penalties imposed on Shri Prem Jain and Shri Gyan Jain lacked legal basis and were set aside.

Moreover, it was highlighted that the order failed to specify the quantum of penalties under each rule. Therefore, the impugned order was overturned concerning the penalties on the appellants. Both appeals were allowed, setting aside the penalties on Shri Prem Jain and Shri Gyan Jain, with any consequential relief granted to them. The judgment was pronounced on 29/11/2024.