2014 (5) TMI 379 - HC - Central Excise

Penalty - Duty demand - Held that - The appellant only issued invoices and passed on the Cenvat credit without actually delivering the goods - appellant was a registered dealer who was involved in issuing bogus invoice without selling any goods to M/s Sonia Overseas on the basis of which the said firm took the Cenvat Credit. It was in those circumstances that the penalty of ₹ 1 lac was imposed under Rule 25(1)(d) and 26(1) of the Rules - even if there is jurisdiction to levy penalty equal to the amount of duty evaded distinction in culpability may be found in person who actually evades the duty and the person who enables the same to be done. This distinction in culpability may be required to be gone into from case to case - no substantial question of law arises in this appeal - Decided against assessee.

Summary

Issues:
Appeal under Section 35G of the Central Excise Act, 1944 for quashing order upholding penalty imposition under Rule 26(2) of the Central Excise Rules, 2002.

Analysis:
1. The appellant, a registered dealer, issued bogus invoices without actual sale of goods, leading to the recipient availing Cenvat Credit, as per the findings of the Central Excise Commissionerate officers.
2. The show cause notice alleged the appellant's involvement in issuing bogus invoices to enable fraudulent Cenvat Credit claims, seeking imposition of penalty under Rule 26(2) of the Central Excise Rules, 2002.
3. The Tribunal dismissed the appeal, upholding the penalty imposition, citing the judgment in Vee Kay Enterprises v. CCE, where it was held that even without Rule 26(2) applicability, penalties under Rule 25(1)(d) and 26(1) could be imposed for involvement in selling goods liable for confiscation.
4. The High Court concurred with the Tribunal's decision, emphasizing that the appellant's actions warranted penalty under Rule 25(1)(d) and 26(1) despite the incorrect invocation of Rule 26(2) in the show cause notice.
5. The Court highlighted that the appellant's issuance of bogus invoices without actual delivery of goods, facilitating duty evasion, justified the penalty imposition under the relevant rules.
6. Additionally, the Court referenced the distinction in culpability between those directly evading duty and those enabling such evasion, indicating the need for case-specific analysis in determining penalties.
7. Ultimately, the Court dismissed the appeal, concluding that no substantial question of law arose from the case, thereby upholding the penalty imposition under Rule 25(1)(d) and 26(1) of the Central Excise Rules, 2002.