2013 (11) TMI 687 - AT - Central Excise

Issuance of invoice without supply of material - Waiver of pre deposit - Availment of credit in respect of the defective bars - Held that - manufacturing unit was not clearing defective bars but issued only invoices for defective bars on the basis of which the applicant being registered dealer further issued invoices to dealer M/s Patiala Castings (P) Ltd. As such the manufacturer has availed credit on such invoices. Therefore, the applicants have not made out a total waiver of penalty - Prima facie case not in favour of assessee - Stay granted partly.

Summary

Issues:
Waiver of penalty under Rule 25/26 of Central Excise Rules, 2002 for issuing invoices without supplying defective bars.

Analysis:
The judgment by Appellate Tribunal CESTAT NEW DELHI, delivered by Mr. S.S. Kang, pertained to two applications seeking waiver of penalties totaling Rs.5,82,492/- and Rs.4,20,859/- under Rule 25/26 of Central Excise Rules, 2002. The applicants, registered dealers, had issued invoices to a manufacturer for defective bars, enabling the manufacturer to avail credit. The Revenue alleged that the manufacturer had issued fake invoices, which led to the applicant issuing invoices without receiving any material. The Revenue's investigation concluded that the manufacturing unit did not clear defective bars but only issued invoices. Consequently, the Tribunal directed the applicants to deposit Rs.1 lakh in each case within four weeks. Upon compliance, pre-deposit of the remaining penalty amount was waived, and recovery stayed pending appeals, with a reporting deadline set for 25.3.2013.

In the case, the key issue revolved around whether the applicants were justified in seeking a complete waiver of penalty for issuing invoices without supplying defective bars. The Tribunal considered the Revenue's argument that the manufacturer had utilized fake invoices to avail credit, leading to the issuance of further invoices by the applicants without actual material transfer. The Tribunal noted that while the applicants contended they had indeed supplied defective bars to the manufacturer, the Revenue's investigation revealed otherwise, indicating that the manufacturing unit did not physically transfer the defective bars but only issued invoices. This discrepancy formed the basis for the Tribunal's decision regarding the penalty waiver.

The Tribunal's decision was grounded in the finding that the applicants had not substantiated a case for a total waiver of penalty due to the discrepancy between the actual supply of defective bars and the issuance of invoices. By directing the applicants to deposit a specified amount within a stipulated timeframe, the Tribunal balanced the interests of the parties involved. The conditional waiver of the remaining penalty amount, subject to compliance and pending appeals, aimed to provide relief while ensuring accountability. The Tribunal's approach underscored the importance of adherence to regulatory requirements and the need for transparency in commercial transactions to prevent misuse and uphold the integrity of the excise system.