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2019 (2) TMI 306 - AT - Central ExciseCENVAT Credit - fictitious invoices - invoices without corresponding procurement of goods described therein - confiscation - applicability of rule 26 of Central Excise Rules, 2002 - Held that - There is no record of any investigations having been pursued with the recipients on record to ascertain the receipt of the goods at the destination. Also, despite the retraction of the statement of the supervisor that indicted the appellant, the investigation failed to obtain facts that could have corroborated the statement and sustain it even after the person had expired. It is clear from the Rule 26 of CER that confiscability of goods is an essential prerequisite for imposition of penalty. In the instant dispute, there is no allegation that the impugned goods did not come into possession of the appellant. On the contrary, the entire cases been built around the goods not having passed into the possession of the buyers named in the 703 invoices and, therefore, the goods are not offending even if sold to buyers who are not on record - In the absence of any offence in relation to the goods that are alleged to have been not supplied to persons on record, rule 26 cannot be invoked. On this restriction in and non-applicability of, rule 26 of Central Excise Rules, 2002, the impugned order is liable to be set-aside. Appeal allowed - decided in favor of appellant.
Issues:
1. Imposition of penalty under rule 26 of Central Excise Rules, 2002 based on alleged fictitious invoices. 2. Applicability of penalty under rule 26 to partnership firms. 3. Lack of evidence regarding non-receipt of goods by buyers named in invoices. 4. Interpretation of the definition of 'person' under rule 26. 5. Reliance on retracted statements and lack of corroborating evidence. Analysis: Issue 1: Imposition of penalty under rule 26 The appeal involved M/s SJS Polymers, accused of facilitating fictitious availment of CENVAT credit through recovered invoices. The penalty of &8377; 87,08,253/- was imposed under rule 26 of Central Excise Rules, 2002. The appellant argued lack of evidence against them, highlighting that only a few invoices were certified as fictitious. The Tribunal found that the penalty was based on a weak foundation and lacked substantial evidence against the appellant, leading to the decision to set aside the penalty. Issue 2: Applicability of penalty to partnership firms The appellant contended that penalty under rule 26 is applicable only to 'persons' and not partnership firms. Citing previous decisions, the appellant argued that a partnership firm does not fall under the definition of 'person' for penalty imposition. The Tribunal agreed with this argument, citing precedents and set aside the penalty on this ground. Issue 3: Lack of evidence on non-receipt of goods The investigation failed to establish the receipt of goods by buyers named in the invoices. Despite a retracted statement indicting the appellant, lack of corroborating evidence raised doubts. The appellant provided statements and book extracts as evidence of genuine transactions. The Tribunal noted the absence of acceptable evidence and lack of clarity in the certification from octroi authorities, leading to the decision to set aside the penalty. Issue 4: Interpretation of 'person' under rule 26 The Authorized Representative argued that the appellant's status as a 'person' subjected them to penalty under rule 26. However, the Tribunal emphasized that confiscability of goods is a prerequisite for penalty imposition. As the goods were not proven to be not supplied to buyers on record, rule 26 could not be invoked, leading to the decision to set aside the penalty. Issue 5: Reliance on retracted statements The appellant raised concerns about selective reliance on retracted statements and lack of further investigation by central excise authorities. The Tribunal noted the absence of concrete evidence and the need for corroboration, ultimately setting aside the penalty due to the lack of legality and propriety in the proceedings. In conclusion, the Tribunal found the proceedings against the appellant to be contrary to law, setting aside the penalty and allowing the appeal based on the lack of substantial evidence, misinterpretation of the law regarding penalty imposition on partnership firms, and absence of proof regarding non-receipt of goods by buyers named in the invoices.
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