2014 (1) TMI 779 - AT - Central Excise

Cenvatable invoices issued without clearance of duty-paid goods to their customers Waiver of Pre-deposit of penalty under Rule 25 of the Central Excise Rules 2002 read with Section 11AC of the Central Excise Act Personal penalty on director under Rule 26 of the Central Excise Rules 2002 Held that - The offence alleged by the department pertains to a period after 1.3.2007, the date with effect from which Sub-rule (2) of Rule 26 came into force providing a penalty for a dealer issuing cenvatable invoices without goods - The question whether, in lieu of Rule 26(2), Rule 25(1) could be invoked against the dealer has been debated before me at length - There was no intention to evade payment of duty which can be attributed to the company - Rule 25(1)(d) could be applied to a person who was concerned in selling or dealing with goods which were liable to confiscation - This view was taken in proceedings where the department proposed to penalize not only the dealer who issued invoices without goods but also his customer who took CENVAT credit on the basis of such invoices without receiving goods - There is no evidence of their customers having been penalized Penalty imposed on the assessee waived and stayed till the disposal Stay granted.

Summary

Issues:
1. Penalty imposition on the company for issuing 'cenvatable' invoices without clearance of duty-paid goods to customers.
2. Invocation of Rule 25 and Rule 26 in the case without proper determination or demand of duty.
3. Interpretation of Rule 25(1)(d) and Rule 26(1) in relation to the dealer's conduct.
4. Comparison of the present case with the precedent set in M/s Vee Kay Enterprises case regarding penalization of dealers and customers.

Issue 1: Penalty imposition on the company
The judgment addresses the penalties imposed on the company for issuing 'cenvatable' invoices without clearing duty-paid goods to customers. The penalty of Rs. 4,00,000/- on the company and Rs. 40,000/- on one of its Directors under Rule 25 and Rule 26 of the Central Excise Rules 2002 respectively were under scrutiny. The learned counsel argued that Rule 25 could not have been invoked without determination or demand of duty. The Superintendent (A.R.) contended that the conduct of the company contravened Rule 11 by issuing invoices without goods. However, the judge found the Superintendent's arguments unconvincing as there was no intent to evade duty, given that the entire stock of goods was duty-paid.

Issue 2: Invocation of Rule 25 and Rule 26
The judgment deliberates on the invocation of Rule 25 and Rule 26 without proper determination or demand of duty. The judge noted that the penalty on the company was based on the issuance of 'cenvatable' invoices without clearance of duty-paid goods. The Superintendent (A.R.) argued that Rule 25(1)(d) applied due to the contravention of Rule 11. However, the judge found that the intent to evade payment of duty could not be attributed to the company, especially when all goods in their possession were duty-paid. The judge also highlighted the absence of invoking Sub-rule (2) of Rule 26 in the show-cause notice against the appellant.

Issue 3: Interpretation of Rule 25(1)(d) and Rule 26(1)
The judgment scrutinizes the interpretation of Rule 25(1)(d) and Rule 26(1) concerning the dealer's conduct. The Superintendent (A.R.) relied on the M/s Vee Kay Enterprises case to support the penalty imposition. However, the judge distinguished the cited case by emphasizing that in the present scenario, only the dealer was penalized, unlike in the precedent where both the dealer and the customer were penalized in the same proceedings. The judge concluded that the penal liability of the dealer in the cited case stemmed from the totality of facts, which differed from the current case where the dealer was singled out for penalization.

Issue 4: Comparison with M/s Vee Kay Enterprises case
The judgment compares the present case with the precedent set in the M/s Vee Kay Enterprises case regarding penalization of dealers and customers. The judge highlighted that in the cited case, both the dealer and the customer were penalized, whereas in the current case, only the dealer faced penalties. The judge concluded that the precedent could not be blindly followed as the circumstances differed. Consequently, the judge granted waiver and stay to the appellant against the penalties imposed, considering the lack of evidence to attribute intent to evade payment of duty to the company.