2014 (9) TMI 869 - AT - Central Excise

Imposition of penalty u/s 11AC - Bogus invoices issued - Held that - Appellants have conceded that the invoices were issued without ever supplying any goods. As regards their contention that the order of Settlement Commission in respect of M/s. Talbros would cover them too, it is seen that the Settlement Commission itself did not admit their case and such non-admission was not on the ground that they would be covered by the main order in case of Talbros - benefit of the Settlement Commission s order cannot be extended to those who never approached the Settlement Commission. - in the case of Vee Kay Enterprises (2011 (3) TMI 133 - PUNJAB AND HARYANA HIGH COURT) has discussed this very issue and has come to a finding that even in such cases, penalty can be imposed. However, penalty is reduced to 25% - No infirmity in the impugned order - Decided partly in favour of assessee.

Summary

Issues:
- Imposition of penalty on the appellants for issuing invoices without supplying any goods.
- Applicability of Settlement Commission's order on the appellants.
- Contention regarding penalty under Rule 25 of Central Excise Rules 2002.
- Quantum of penalty imposed on the appellants.

Analysis:

Issue 1: Imposition of Penalty
The appellants appealed against the penalty imposed on them for issuing invoices without supplying any goods. The facts revealed that the invoices were used by another company to claim credit without actual receipt of goods. The Settlement Commission did not admit the appellants' case, leading to adjudication. The Commissioner (Appeals) remanded the case for de novo adjudication, resulting in the imposition of the penalty, which was later upheld. The appellants admitted to issuing invoices without goods but contested the penalty.

Issue 2: Settlement Commission's Order
The appellants argued that since the Settlement Commission settled the case for the other company involved, the same should apply to them. However, the Tribunal found that the Settlement Commission did not admit the appellants' case based on the main order for the other company. The Tribunal referenced relevant case laws to support the decision that the benefit of the Settlement Commission's order cannot extend to parties who did not approach the Commission.

Issue 3: Penalty under Rule 25
The appellants contended that penalty under Rule 25 of Central Excise Rules 2002 should not apply as no goods were involved. However, citing the judgment of the Punjab & Haryana High Court, the Tribunal held that even in cases where no goods were physically supplied, penalty could be imposed. The Tribunal emphasized that issuing invoices without delivering goods to enable duty evasion constitutes a violation of the rules, justifying the penalty.

Issue 4: Quantum of Penalty
Regarding the quantum of penalty, the appellants argued that the penalty was excessive and should be reduced to 25% of the duty involved under Section 11AC of the Central Excise Act 1994. The Tribunal noted that the reduction under Section 11AC is subject to conditions and found no mitigating factors in the appellants' case to justify a lower penalty. The deliberate fraud involving document manipulation led the Tribunal to uphold the penalty without any reduction.

In conclusion, the Tribunal dismissed the appeal, finding no infirmity in the impugned order and upholding the penalty imposed on the appellants for issuing invoices without supplying goods, rejecting their arguments regarding Settlement Commission's order, penalty applicability, and quantum of penalty.