2021 (2) TMI 806 - HC - Central Excise

Imposition of penalty u/r 25 of CER - Second stage Dealer - Violation in respect of issuing Invoice - whether, the first respondent is correct in holding that the appellant has not contested the commission of fraud when all along the appellant is contesting and participating in the proceedings - scope of the adjudication order - HELD THAT - Rule 25 of Central Excise Rules would clearly stand attracted to the case on hand. Rule 25 deals with 'confiscation and penalty'. Sub-Rule (1) states that subject to the provisions of Section 11AC of the Act, if any producer, manufacturer, registered person of a warehouse or a registered dealer (a) removes any excisable goods in contravention of any of the provisions of the rules or the notifications issued under the rules or (d) contravenes any of the provisions of the rules or the notifications issued under the rules with an intent to evade payment of duty, then all such case shall be liable for confiscation and the producer or manufacturer or the registered person of the warehouse or a registered dealer, as the case may be, shall be liable to penalty. Admittedly, the assessee is a registered dealer. The Tribunal rightly referred to Rule 11(7), which covers the removal from the premises of a second stage dealer and for such removal, the second stage dealer has to issue proper invoices disclosing full and true particulars. On facts, the Tribunal approved the finding of the Adjudicating Authority and the first appellate authority that proper invoices were not issued and consequently, there is contravention of Rule 25(a) in respect of duty paid goods supplied to units not availing CENVAT credit. Further, the Tribunal rightly observed that in respect of non-duty paid goods, cleared to the manufacturers, under invoice showing duty payment, there is a clear violation of the Rules with intent to evade payment of excise duty on final products manufactured by paying such duty through fraudulent credit - the entire dispute revolves on facts, which have been brought out in detail by the Adjudicating Authority in Order-in-Original dated 21.01.2010. Appeal dismissed.

Summary

Issues:
1. Applicability of Rule 25 of Central Excise Rules 2004 to dealers and imposition of penalty.
2. Contesting of fraud allegation by the appellant.
3. Scope of adjudication order by the Commissioner (Appeals).

Analysis:

Issue 1: Applicability of Rule 25 and Imposition of Penalty
The appellant, a registered dealer of iron and steel products, faced a show cause notice alleging the supply of non-duty paid goods while passing on CENVAT credit. The Adjudicating Authority imposed a penalty under Rule 25 of the Central Excise Rules, which was upheld by the Tribunal. The appellant argued that Rule 25 did not apply as they supplied only duty paid inputs. However, the Court found Rule 25 applicable to registered dealers, holding that contravention with intent to evade duty attracts penalty under this rule. The Tribunal's decision was based on proper invoices not being issued for duty paid goods and clear violation in supplying non-duty paid goods.

Issue 2: Contesting Fraud Allegation
The appellant contended that they contested the fraud allegation, contrary to the first appellate authority's finding. The Court examined the Order-in-Original and upheld that the appellant did contest the fraud issue. The appellant's argument was supported by legal precedent, emphasizing their active participation in the proceedings. However, the Tribunal's decision was upheld based on the factual findings regarding the issuance of invoices and evasion of duty.

Issue 3: Scope of Adjudication Order
The appellant raised concerns about the Commissioner (Appeals) exceeding the scope of the adjudication order. The Court did not find any substantial legal question arising from this issue. The judgment emphasized that the dispute primarily revolved around factual details presented in the Adjudicating Authority's order, indicating that no legal question of significance arose for consideration.

In conclusion, the Court dismissed the appeal, stating that no substantial legal questions were present for review. The decision was based on the application of Rule 25 to the appellant's case, the contestation of fraud allegation, and the absence of legal issues beyond factual disputes.