2013 (12) TMI 1340 - AT - Central Excise

Penalty under Rule 25 (1) (d) and Rule 26(1) of the Central Excise Rules, 2002 - Bogus invoice issued without selling the goods Held that - Just because the show cause notice invoked sub-Rule (2) of Rule 26 which could not be invoked, invoking of a wrong rule would not initiate, the show cause notice as the show cause notice clearly alleges that the appellant had issued a bogus invoice without supplying any material to enable his customer or fraudently avail the Cenvat credit and sought imposition of penalty for the offence Following Vee Kay Enterprises vs. CCE2011 (3) TMI 133 - PUNJAB AND HARYANA HIGH COURT penalty would be attracted under Rule 25 (1) (d) as well as Rule 26(1) of the Central Excise Rules, 2002 Decided against Assessee.

Summary

Issues:
1. Imposition of penalty on the appellant for issuing bogus invoices without supplying any material.
2. Applicability of Rule 26 (2) for penalty imposition.
3. Validity of penalty under Rule 25 (1) (d) and Rule 26 (1) of Central Excise Rules.

Analysis:
1. The case involved the imposition of a penalty on the appellant, a registered dealer dealing in zinc ingots, for issuing bogus invoices to a customer without supplying any goods. The customer took Cenvat credit based on these invoices. The Jurisdictional Assistant Commissioner confirmed the Cenvat credit demand against the customer and imposed a penalty on the appellant under Rule 26 of the Cenvat Credit Rules. The Commissioner (Appeals) upheld this order, leading to the appellant filing an appeal.

2. The appellant's counsel argued that the penalty was imposed under Rule 26 (2), which did not exist at the time of the alleged offense in March 2004. The counsel cited judgments to support the argument that penalty could not be imposed under a rule that was not in existence during the relevant period. However, the Departmental Representative contended that penalties could still be imposed under Rule 25 (1) (d) and Rule 26 (1) of the Central Excise Rules, even if Rule 26 (2) was not applicable.

3. The Tribunal considered the submissions and the facts of the case. It noted that the appellant had indeed issued bogus invoices without selling any goods, leading to the customer availing Cenvat credit. Despite the absence of Rule 26 (2) at the time of the offense, the Tribunal referred to a judgment by the Hon'ble Punjab & Haryana High Court, which held that penalties could be imposed under Rule 25 (1) (d) and Rule 26 (1) of the Central Excise Rules for such offenses. The Tribunal concluded that the appellant could still be penalized under these rules, even if the specific sub-rule was not applicable.

4. The Tribunal emphasized that the show cause notice clearly alleged the offense of issuing bogus invoices to facilitate Cenvat credit fraudulently. It held that invoking the wrong rule in the notice did not invalidate the penalty imposition, as the appellant's actions fell under the purview of Rule 25 (1) (d) and Rule 26 (1) of the Central Excise Rules. Therefore, the Tribunal dismissed the appeal, upholding the penalty imposed on the appellant.

In conclusion, the Tribunal affirmed the penalty on the appellant for issuing bogus invoices, highlighting the applicability of Rule 25 (1) (d) and Rule 26 (1) of the Central Excise Rules despite the absence of Rule 26 (2) at the time of the offense.