2013 (7) TMI 500 - AT - Central Excise

Penalty under Rule 25 of the Central Excise Rules, 2002 fist stage dealer / second stage dealer - Receipt of invoices without the receipt of goods Cenvat Credit wrongly passed on Held that - Appellants are second stage dealers who received the invoices from the first stage dealer - Appellants categorically admitted that they have not received the goods manufactured by manufacturer - Name of the manufacturer required to be mentioned on the invoices - Since appellants have not received the goods from manufacturers, it was their duty not to pass on the credit to the subsequent buyers or the manufacturers As per the decision in the case of VK Enterprises 2011 (7) TMI 970- CESTAT, DELHI , the penalty equal to the duty amount is imposable in cases invoices are issued without receipt of goods Decided against the Assessee.

Summary

Issues:
- Liability of penalty under Rule 25 of the Central Excise Rules for passing on inadmissible credits to manufacturers as second stage dealers.

Analysis:
1. Background: The appeal was filed against the order-in-Appeal passed by the C.C.E. (Appeals), Delhi-IV, where the appellants, registered as second stage dealers with the Central Excise Department, were found to have passed inadmissible credits received from first stage dealers to manufacturers without receiving the goods. A penalty of Rs.3,64,131 was imposed on the appellants under Rule 25 of the Central Credit Rules.

2. Appellant's Argument: The appellant's advocate contended that the order by the Commissioner (Appeals) was unsustainable as there was no identification mark of the manufacturer on the goods received, making it challenging to prove that the invoices were received without any goods. It was argued that the first stage dealer issued the invoices and sent the goods, making the penalty unjustified.

3. Revenue's Submission: The Departmental Representative argued that the appellants admitted in their statement under section 14 of the Central Excise Act that they did not receive the goods from the manufacturers mentioned in the invoices. As second stage dealers, it was their obligation not to pass on the credit to the recipients without receiving the goods, thereby violating Central Excise Rules. The Revenue also cited a Tribunal decision supporting the imposition of penalties in similar cases.

4. Judgment: The key issue was whether the appellants were liable for penalty under Rule 25 of the Central Excise Rules. The judge noted that the appellants admitted to not receiving goods from certain manufacturers mentioned in the invoices. As per the law, the name of the manufacturer should be on the invoices, and since goods were not received, passing on the credit was a violation. The judge found the lower authority's decision justifiable and upheld the penalty imposition. Referring to a previous Tribunal decision, the judge confirmed that penalties equal to the duty amount can be imposed when invoices are issued without goods being received. Consequently, the order-in-appeal was upheld, and the appeal was rejected.

This detailed analysis outlines the case background, arguments presented by both sides, and the judge's reasoning leading to the decision regarding the liability of penalty under Rule 25 of the Central Excise Rules for passing on inadmissible credits as second stage dealers.