2017 (11) TMI 603 - AT - Central Excise

CENVAT credit - fake invoices - allegation made by the investigating agency is that appellant were availing cenvat credit on the invoice in respect of scrap but scrap covered under the said invoice were not received - principles of natural justice - Held that - though the adjudicating authority has tried his best to comply with principle of natural justice and granted number of opportunity of personal hearing and also allowed the cross examination but the fact remains that appellant have not received all the relied upon documents, the cross examination of the witnesses could not be conducted therefore though there is no fault of the Ld. Commissioner but for meeting end of the justice, we are of the view that one more opportunity can be given to the appellant for cross examination of the witnesses and the documents may also be provided to the appellant for making their final defence - matter on remand. Penalties u/r 26 - Held that - as per the act/role prescribed under Rule 26, it is not possible to carry out such acts/play role by artificial person as company therefore penalty under Rule 26 can only be imposed on the natural person and not on the company - As regard the personal penalties imposed on the other individual persons under Rule 26, we find that there is no case of handling of offended goods as the entire case is of alleged fraudulent availment of Cenvat credit by M/s. Bhavshakti Steelmines Pvt Ltd, therefore all persons have not dealt with the goods which is liable for confiscation - The period involved in the present case is April, 2003 to March, 2004 during such period there was no pari material provision of sub rule (2) of Rule 26 therefore penalty under Rule 26 was not imposable for the role of the person involved in the present case, accordingly penalties u/r 26 were set aside and the appeals of the other appellants are allowed. Appeal allowed in part and part matter on remand.

Summary

Issues:
1. Confirmation of demand of wrongly availed credit by M/s. Bhavshakti Steelmines Pvt Ltd.
2. Imposition of penalties under Rule 26 on various appellants.

Confirmation of Demand:
The appeals were directed against an Order-in-Original confirming a demand of ?76,41,216 towards wrongly availed credit by M/s. Bhavshakti Steelmines Pvt Ltd. The demand was based on the allegation that the appellant availed Cenvat credit on invoices for scrap not received, but instead received scavenger/bazar scrap. The investigation revealed a shortage of 3229.605 MT, indicating that the goods mentioned in the invoices were not received by the appellant. Detailed investigations with manufacturers, dealers, and transporters supported the department's claim. The show cause notice led to the confirmation of the demand and imposition of penalties on various parties.

Imposition of Penalties under Rule 26:
The penalties under Rule 26 were imposed on multiple appellants. The argument raised was that penalties cannot be imposed on the company and its representatives under Rule 26 as it pertains to natural persons, not artificial entities like companies. The judgments cited supported this interpretation. It was also contended that penalties under Rule 26(2) could not be imposed for the period before March 2007, as the provision was inserted only then. As the case involved fraudulent availment of Cenvat credit, not handling of offending goods, and considering the absence of the relevant provision during the period in question, the penalties under Rule 26 were set aside for the other appellants.

The Tribunal remanded the appeals of M/s. Bhavshakti Steelmines Pvt Ltd and its director for a fresh order, while allowing the appeals of the other appellants. The judgment emphasized the importance of following principles of natural justice and provided detailed reasoning for setting aside the penalties imposed under Rule 26 on the other appellants.