2009 (7) TMI 954 - AT - Central Excise

Summary

Issues:
1. Imposition of penalty under Rule 25 of the Central Excise Rules, 2002 on a second stage dealer for issuing Cenvatable invoices without physically supplying goods.
2. Applicability of Rule 25 and Rule 26 to a dealer in the context of contravention of provisions of law with intent to evade payment of duty.
3. Examination of intent to evade payment of duty and the absence of invoking Rule 26 against the appellant.

Analysis:

1. The judgment addresses the imposition of a penalty under Rule 25 of the Central Excise Rules, 2002 on the appellant, a second stage dealer, for issuing Cenvatable invoices without physically supplying goods. The lower authorities imposed a penalty based on the appellant's actions in October 2004, where they issued invoices without actual delivery of goods to enable purchasers to avail CENVAT credit. The appellant had obtained a similar invoice from a first stage dealer in Delhi without receiving goods, leading to a show-cause notice. The appellant's counsel argued that Rule 25 is not applicable to dealers, highlighting a lack of duty liability for a second stage dealer in goods purchased from a first stage dealer. The counsel also pointed out the difficulty in applying Rule 26 to the case, especially considering the amendment introducing penalties for issuing invoices without goods delivery post-1-3-2007.

2. The judgment delves into the applicability of Rule 25 and Rule 26 to dealers regarding contravention of provisions of law with intent to evade payment of duty. The Tribunal considered the submissions and found that the show-cause notice invoked Rule 25 without establishing intent to evade duty. The rule making authority's acknowledgment of the non-applicability of Rule 25 to registered dealers, as seen in the incorporation of a special penal provision under Rule 26 from 1-3-2007, was noted. Despite this, Rule 26 was not invoked against the appellant, raising questions about the correct application of penalty provisions to dealers like the appellant.

3. The judgment concludes by stating that the appellant has made out a prima facie case against the penalty, leading to a waiver of pre-deposit and a stay of recovery concerning the penalty amount. This decision is based on the lack of established intent to evade payment of duty and the absence of invoking Rule 26 against the appellant, highlighting the need for a proper application of penalty provisions in cases involving dealers and the issuance of invoices without goods delivery.

This detailed analysis of the judgment provides a comprehensive understanding of the issues involved and the Tribunal's decision regarding the imposition of penalties on a second stage dealer under the Central Excise Rules.