2015 (1) TMI 585 - AT - Central Excise

Imposition of penalty u/s 11AC - Bogus invoices - invoices were allegedly issued without ever supplying any goods - 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. The judgement in the case in K.I. International Ltd. (2013 (5) TMI 383 - CESTAT, CHENNAI) takes note of the judgement in the case of S.K. Colombowala (2007 (7) TMI 514 - CESTAT, MUMBAI) and holds that the benefit of the Settlement Commission s order cannot be extended to those who never approached the Settlement Commission. The ld. Advocate stated that the order in case of K.I. International Ltd. has been stayed by the High Court, but I find that the stay is an interim stay on condition of 50% deposit and bank guarantee for the remaining amount which obviously means that what has been stayed is the consequential recoveries in terms of that order. As stated earlier, the Settlement Commission itself did not consider that the appellants would be covered by their order in case Talbros. As such, the contention of the appellants in this regard is not sustainable. In the light of the foregoing the appellants contention that they are not liable to penalty under Rule 25 ibid is untenable - reduction to 25% of duty involved, under Section 11AC ibid is subject to several conditions. Further in the case of the appellants, the fraud committed is deliberate and blatant and involved manipulation of documents. In fact, I find no mitigating factors in this case to justify lower penalty. - Decided against assesse.

Summary

Issues:
1. Imposition of penalty on the basis of invoices issued without supplying goods.
2. Contention regarding settlement by Settlement Commission for another party.
3. Applicability of penalty under Rule 25 of Central Excise Rules 2002.
4. Quantum of penalty imposed.

Issue 1: Imposition of Penalty
The appellant appealed against the penalty imposed due to issuing invoices for capital goods without supplying them. The case involved M/s Talbros Automotive Components Ltd. taking credit based on these invoices without actual goods being supplied. The Directorate General of Central Excise Intelligence (DGCEI) initiated action against the appellants and other suppliers for issuing such invoices without goods. The Settlement Commission did not find the appellant's case eligible for settlement, leading to the penalty imposition upheld through subsequent adjudication.

Issue 2: Settlement Commission Contention
The appellants argued that since M/s Talbros' case was settled by the Settlement Commission, their case should also be considered settled. They cited a judgment to support their claim. However, the Settlement Commission did not admit the appellant's case, indicating that the benefit of settlement could not be extended to them. The Tribunal rejected this contention based on legal precedents and the specific circumstances of the case.

Issue 3: Applicability of Penalty under Rule 25
The appellants contended that penalty under Rule 25 of the Central Excise Rules 2002 could not be imposed as no goods were involved. They referenced a CESTAT judgment to support their argument. However, the Tribunal referred to a Punjab & Haryana High Court judgment that allowed penalties even in cases where goods were not physically involved. The Tribunal held that the appellant's argument regarding the non-applicability of the penalty under Rule 25 was not sustainable based on legal precedents and interpretations.

Issue 4: Quantum of Penalty
Regarding the quantum of penalty, the appellants argued that the imposed penalty was excessive and should be reduced to 25% of the duty involved under Section 11AC of the Central Excise Act 1994. However, the Tribunal noted that such reduction was subject to conditions and found no mitigating factors in the appellant's case to justify a lower penalty. The deliberate and blatant fraud committed by the appellants, including 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. The detailed analysis of each issue highlighted the legal interpretations, precedents, and specific circumstances that guided the Tribunal's decision to uphold the penalty imposed on the appellants.