2010 (5) TMI 165 - HC - Central Excise

Fake Modvat / Cenvat Credit issue of blank / fake G.R. - penalty on transporters - the adjudicating authority found that the goods imported had actually not been transported by the respondent-transporters and they had issued fake G.R.s making them liable for penal action under Rule 209-A of the Central Excise Rules 1944 - The adjudicating authority imposed a penalty of Rs.50, 000/- each on the transporters for abetting the fraud. Tribunal waived the penalty on transporters Held that - A perusal of the aforementioned facts clearly shows that M/s Milap Transport Carriers and M/s Deepak Roadways had helped the dealers to raise bogus/fake modvatable documents under the Central Excise law in order to fraudulently help the buyers to avail modvat credit. They had not transported the goods but yet had issued blank books of G.R.s and had thus abetted in passing of the fake/bogus modvatable documents to various manufacturers resulting into loss of duty amounting to Rs.62.90 lacs to the Government. Penalty on transporters confirmed

Summary

Issues:
1. Interpretation of Rule 209-A of the Central Excise Rules, 1944 regarding penalty for certain offenses.
2. Whether the transporters abetted in passing fake modvat invoices and are liable for penalty under Rule 209-A.

Analysis:
1. The judgment concerns the interpretation of Rule 209-A of the Central Excise Rules, 1944, specifically regarding penalties for certain offenses. The Revenue challenged an order by the Tribunal setting aside a penalty of Rs.50,000 imposed on each respondent. The case involved irregularities discovered during a search at the premises of M/s Shobit Impex and M/s Gandhi Chem-Fert Industries. It was found that the transporters had not actually transported the goods but had issued fake G.R.s. The adjudicating authority imposed penalties on the transporters under Rule 209-A for abetting the fraud.

2. The Tribunal accepted the appeal filed by the respondent transporters, ruling that the penalties under Rule 209-A were not applicable as the transporters had not transported the goods and had not acquired possession of the excisable goods. The Revenue argued that the transporters indirectly facilitated the issuance of fake modvat credit by supplying blank G.R.s to the dealer. The Tribunal's failure to consider the criminal intentions of the transporters was highlighted. The court held that the transporters knew the G.R.s were fake and had facilitated the fraud, making them liable under Rule 209-A.

3. The court found that the transporters had indeed abetted in passing fake modvat invoices by supplying blank G.R.s, resulting in a loss of duty to the Government. The Tribunal's findings that Rule 209-A did not apply were deemed erroneous. Rule 209-A imposes penalties on individuals dealing with goods they know are liable for confiscation. Therefore, the question of law was answered in favor of the Revenue, and the order of the Tribunal was set aside, restoring the Commissioner's order imposing penalties on the transporters.

Conclusion:
The judgment clarifies the application of Rule 209-A in penalizing individuals involved in facilitating fraudulent activities related to excisable goods. The transporters were held liable for abetting the issuance of fake modvat invoices, emphasizing the importance of upholding the integrity of excise laws and preventing duty evasion.