2016 (4) TMI 979 - HC - Central Excise

Imposition of penalty equivalent to the amount of credit passed - Purchase of only invoices from the manufacturer without actually buying inputs - Credit was sought to be passed on without invoices being accompanied by the goods - Held that - it was noticed by the Tribunal that such an action is certainly a major violation of the provisions of law and being so the question of exercise of any discretion in favour of the offender or showing any leniency to the offenders could not arise. This would not satisfy the test of being a speaking order which is a sine qua non for deciding the appeals. No legally justified reasons have been recorded by the Tribunal for dismissing the appeal of the assessee. The Tribunal being a final fact finding authority was required to deal with all aspects of facts and also law and then record its conclusions based thereon. - Matter remanded back

Summary

Issues:
- Imposition of penalty equivalent to Cenvat Credit amount
- Justification of penalty amount compared to similar cases
- Perversity of the impugned order

Imposition of penalty equivalent to Cenvat Credit amount:
The appellant purchased only invoices without buying inputs, facilitating manufacturers to take cenvat credit. A show cause notice was issued for imposing penalty under Rule 25 of the Central Excise Rules. The penalty imposed was equivalent to the amount of credit passed, which was contested by the appellant. The appellant argued that it did not take cenvat credit itself, and the penalty imposed was unreasonable and harsh as it got enriched only to a small percentage of the credit passed on. The appellant contended that the order lacked reasoning and should be quashed. The revenue, however, supported the Tribunal's order.

Justification of penalty amount compared to similar cases:
The Tribunal had rejected all appeals against the penalty in similar cases. The appellant cited a previous case where 100% penalty was upheld for wrongly claiming cenvat credit, while 10% penalty was imposed for issuing invoices. The impugned order did not provide legally justified reasons for dismissing the appeal. The Tribunal's failure to consider all aspects of facts and law and provide a speaking order was highlighted as a flaw. Consequently, the Tribunal's decision was set aside, and the matter was remanded for a fresh decision after affording an opportunity of hearing to the parties.

Perversity of the impugned order:
The Tribunal's decision was found lacking in legally justified reasons and a comprehensive analysis of facts and law. The order was considered non-speaking and not meeting the requirements for deciding appeals. As the Tribunal is a final fact-finding authority, it was expected to address all aspects of the case before reaching a conclusion. The lack of a well-reasoned order necessitated the remand of the matter for a fresh decision in compliance with the law.