2016 (1) TMI 524 - AT - Central Excise

Levy of penalty on dealers who issues Bogus Invoices - Cenvat Credit - Bogus credit - It is alleged that the appellant-assessee availed ineligible and irregular credit of duty paid on MS scrap as if it was supplied by M/s.Victoria Steel Enterprises Ltd. based on the documents prepared indicating bogus transaction particulars, without actual/physical movement of the M.S. Squares said to have been used in the manufacture of TMT bars thereby contravened the provisions of Rule 4 (1) of Cenvat Credit Rules, 2004. - Held that - appellant s intention of violation of CER is established beyond doubt and they are liable for penalty both under Rule 15 (1) and Rule 26. So appellant s contention that penalty is imposable only under Rule 15 and not under Rule 26 (2) is not sustainable and not acceptable. In this regard, Rule 26 of CER provides penalty for certain offences. Considering the peculiar facts of the instant case, where this entire circular paper transaction was created by the appellant and also considering the fact that there is apparently no revenue loss to the Department, the quantum of penalty imposed by L.A is on the higher side in respect of appellants, at Sl.No.1,2,4 & 5 of the Cause Title. Therefore, considering overall circumstances of the case, we reduce the penalty imposed under Rule 26 (2) (i) (ii) on the appellants. - Decided partly in favorof appellant dealers. Demand of cenvat credit - adjudicating authority dropped the demand of cenvat credit - Held that - Though the appellants have created the documents by way of issuing documents and subsequently taking the credit without receipt of the goods, the appellants at the first instance have paid the duty by debiting the cenvat account which was again taken back by above paper transaction. Therefore, we do not find any infirmity in the order of adjudicating authority in so far as regularizing the credit and dropping of recovery of credit. Accordingly, the Revenue s appeal is rejected.

Summary

Issues Involved:
1. Imposition of penalties on the main appellant and co-noticees.
2. Legitimacy of the cenvat credit availed by the main appellant.
3. Applicability of Rule 15 (1) and Rule 26 (2) of Central Excise Rules for penalties.

Detailed Analysis:

1. Imposition of Penalties on the Main Appellant and Co-Noticees:
The adjudicating authority imposed penalties on the main appellant and co-noticees under Rule 15 (i) of CCR 2004 and Rule 26 (2) (i) (ii) of CER 2002. The main appellant, M/s. Sujana Metal Products Ltd., was penalized for creating a circular paper transaction to avail ineligible cenvat credit without actual movement of goods. The co-noticees, being registered dealers, were also penalized for their involvement in this scheme. The Tribunal found that the appellants had deliberately violated Central Excise Rules by issuing invoices without physical movement of goods, thus justifying the penalties. However, considering the peculiar facts and no revenue loss, the penalties were reduced for some appellants.

2. Legitimacy of the Cenvat Credit Availed by the Main Appellant:
The main appellant was accused of availing cenvat credit without actual receipt of inputs, violating Rule 4 (1) of CCR 2004. The adjudicating authority dropped the recovery of cenvat credit but imposed penalties. The Tribunal upheld this decision, noting that the initial credit debited by the appellant was not in dispute and they had sufficient balance in their accounts. The circular transaction was created to show higher turnover to financial institutions, but since the duty was initially paid and then taken back through paper transactions, there was no revenue loss.

3. Applicability of Rule 15 (1) and Rule 26 (2) of Central Excise Rules for Penalties:
The Tribunal held that the appellants were liable for penalties under both Rule 15 (1) and Rule 26 (2) due to their deliberate contravention of Central Excise Rules. Rule 26 (2) applies to any person issuing excise duty invoices without delivery of goods, and the Tribunal cited relevant case laws to support the imposition of penalties. The penalties were deemed appropriate given the gravity of the offense, but the quantum was reduced considering the circumstances.

Conclusion:
The Tribunal partly allowed the appeals of M/s. Sujana Metal Products Ltd., M/s. Endeavour Industries Ltd., M/s. Victoria Steel Enterprises Ltd., and M/s. Future Tech Industries Ltd., by reducing the penalties. The appeal of M/s. Omnicron Bio-Genesis Industries Ltd. was dismissed, and the Revenue's appeal for demanding cenvat credit was rejected. The Tribunal found no infirmity in the adjudicating authority's decision to regularize the credit and drop the recovery of credit.