2012 (12) TMI 171 - AT - Central Excise

Penalty on broker dealing the goods liable to confiscation - appellant acted as a broker only and was not concerned with issuance of invoices without supply of goods - prior to 1-3-07, the provisions of Rule 26(2)(ii) were not available - Hon ble High Court has held that in spite of non-applicability of Rule 26(2) penalty could be levied as the appellant in that case was concerned in selling or dealing with the goods which were liable to confiscation - Rule 25(1)(d) and Rule 26(1) were also applicable Held that - Said observations were made in respect of the persons concerned with the selling of the goods and issuance of the invoices - appellant neither sold the goods nor issued the invoices and has acted only as a broker on commission basis - penalty has been imposed upon on him under Rule 26 without mentioning any sub-rule - appellant is entitled to unconditional stay from the condition of pre-deposit as also from recovery

Summary

Issues:
1. Imposition of penalties against M/s. Lauls Limited and individuals.
2. Pre-deposit of penalties on the Director of M/s. Lauls Limited.
3. Penalty on a broker for connivance in obtaining cenvatable invoices without goods.
4. Applicability of Rule 26 and relevant amendments.
5. Interpretation of High Court decisions regarding penalties.
6. Consideration of the role of the broker in the penalty imposition.
7. Granting of stay petitions.

Analysis:
The judgment by the Appellate Tribunal CESTAT, New Delhi dealt with the imposition of penalties against M/s. Lauls Limited and individuals, including a broker, for their involvement in obtaining cenvatable invoices without goods. The impugned order confirmed demands of duties against M/s. Lauls Limited and imposed penalties on the Director and the broker under Rule 26 of the Central Excise Rules, 2002. The Tribunal noted that M/s. Lauls had already deposited the confirmed duty amount, leading to the dispensation of the pre-deposit condition for the Director. However, the penalty on the broker was contested based on his role as a mere intermediary introducing dealers to M/s. Lauls Limited for raw material purchases. The Tribunal considered the applicability of Rule 26 and relevant amendments, emphasizing that the penalty imposition should align with the specific sub-rules and the timeline of the alleged acts.

Regarding the penalty on the broker, the Tribunal referred to a decision by the Hon'ble Punjab & Haryana High Court, which highlighted the non-applicability of amended provisions to acts committed before a specified date. The Tribunal agreed with the advocate's submissions that the broker's actions were limited to a commission-based role and occurred before the amendment to Rule 26. The Tribunal differentiated the broker's involvement from those directly selling goods or issuing invoices, ultimately concluding that the broker was entitled to an unconditional stay from pre-deposit conditions and recovery, given the lack of specific sub-rule references in the penalty imposition.

In summary, the Tribunal allowed both stay petitions in favor of the individuals involved, considering the specific roles and timelines of their actions in relation to the penalty impositions. The judgment underscored the importance of aligning penalty decisions with the applicable rules and amendments, especially concerning individuals' distinct involvements in the alleged activities.