2022 (6) TMI 774 - AT - Central Excise

Levy of penalty u/r 26 - Personal penalty for abatement in evasion of duty - evasions of huge amount of Central Excise Duty by fraudulent availment of Cenvat Credit - fake and forged central excise invoices - non-existent goods - main contention of the appellants were that no goods were handled by the Appellants - HELD THAT - Rule 26 of the Central Excise Rules are applicable to any person who acquires possession of or in any way concerned in transporting, removing, depositing, keeping, concealing, selling or purchasing or in any other manner deals with any excisable goods which he knows or has reason to believe are liable to confiscation. It is noticed that in the present matter Shreeji Aluminium have shown the sale of goods to M/s G.K. Founders Pvt. Ltd. without actual delivery of the goods, the transporter in his statement also admitted the said facts. Further, during the course of investigation Shri Paresh Babubhai Patel, Director of M/s Shreeji Aluminium Pvt. Ltd. admitted the facts that invoices were prepared and issued in favour of M/s G.K. Founders Pvt. Ltd. without actual delivery of goods to M/s. G.K. Founders Pvt. Ltd. The person who proposed to sell the goods cannot say that he was not a person concerned with selling of goods and merely issued the invoices. Another submission of the learned counsel was that the show cause notice or the impugned order does not propose confiscation of the goods or held liable to confiscation of such goods, this position cannot be appreciated. Appellants were concerned with such cenvatable invoices wherein they shown the clearance of goods without delivery and were in the knowledge that such goods are liable to confiscation. Thus, under the facts and circumstances, the penalty imposed on them is correct. Hon ble High Court of Gujarat in the case of SANJAY VIMALBHAI DEORA VERSUS CESTAT 2014 (11) TMI 620 - GUJARAT HIGH COURT , has held that a person would render himself liable for penalty for indulging in activities mentioned in Rule26 of the Central Excise Rules, 2002, even if goods are not confiscated or had not been rendered liable for confiscation. Further the contention of the appellant that penalty under Rule 26 cannot be invoked on company is also not tenable - Hon ble Supreme Court in the case of MADHUMILAN SYNTEX LTD ORS VERSUS UNION OF INDIA ANR 2007 (3) TMI 670 - SUPREME COURT held that the company is not a natural person but legal or juristic person, cannot be ordered to suffer imprisonment, other consequences but would ensue e.g., payment of fine, etc. Role of M/s Steel Metal, trading firm - HELD THAT - The said trading firm have played a crucial role in the commission of the offence by M/s G.K. Founders. Appellant were concerned with such cenvatable invoices wherein they shown the clearance of goods without delivery and were in the knowledge that such goods are liable to confiscation. Revenue has been able to prove that the appellants were engaged in the activity of issuance of invoices without movement of the goods. Further, a plain reading of Rule26 indicates that imposition of the penalty therein is not tied to a condition that excisable goods have to be placed under confiscation under the Act/Rules - Only, the person implicated/concerned should have the knowledge of possible confiscation of the impugned goods. From the facts on record, the appellant have played crucial role in commission of offence by M/s G.K. Founder. Appellant is liable to penalty under Rule 26 of the Central Excise Rules. Appellant M/s B.S. Roadways and Shri Saleem Saheb Patel, transporter - fictitious LRs without actual delivery of goods - HELD THAT - There are no reason to set aside such a reasoned orders for the imposition of penalty. However, imposing penalty on M/s. B.S Roadways as well as a separate penalty on Proprietor Shri Saleem Saheb Patel, the submission is agreed upon and it is held that the proprietary concern is not a different legal entity from the proprietor. The separate penalty imposed on Shri Saleem Saheb Patel proprietor of M/s B.S. Roadways is set aside. Appeal allowed in part.

Summary

Issues:
Appeal against penalty imposed under Rule 26 of Central Excise Rules, 2002 based on fraudulent availment of Cenvat Credit without actual delivery of goods.

Analysis:
- The appeals challenged the Order-in-Original dated 29.03.2011, which confirmed Cenvat demand, interest, and penalties on the appellants.
- The case involved allegations of passing on Cenvat Credit on non-existent goods to M/s G.K. Founders Pvt. Ltd. without actual receipt of goods, involving multiple entities.
- Appellants argued that they were not liable for penalties under Rule 26 as they did not handle the goods in question, citing relevant legal precedents.
- The Director of M/s Shreeji Aluminium Pvt. Ltd. stated that the goods were duty paid and cleared to another party, not M/s G.K. Founders Pvt. Ltd.
- The absence of any proposal for confiscation of goods was highlighted as a reason for penalties under Rule 26 not being applicable.
- The Tribunal found that the appellants were actively involved in facilitating the fraudulent passing of Cenvat credit by issuing invoices without actual delivery of goods.
- Legal precedents were cited to support the imposition of penalties even when goods were not confiscated or proposed for confiscation.
- The Tribunal rejected the argument that penalties under Rule 26 cannot be imposed on a company, citing relevant Supreme Court decisions.
- The involvement of each appellant in the fraudulent activities was assessed, leading to the dismissal of appeals by M/s Shreeji Aluminium Pvt. Ltd, Shri Paresh Babubhai, and M/s Steel & Metal, while the appeal of Shri Saleem Saheb Patel was allowed.
- Separate penalties on the proprietary concern and the owner were discussed, with the Tribunal setting aside the penalty imposed on the proprietor of M/s B.S. Roadways.

This detailed analysis of the judgment highlights the key legal arguments, findings, and conclusions regarding the penalties imposed under Rule 26 of the Central Excise Rules, 2002 in a case involving fraudulent availment of Cenvat Credit without actual delivery of goods.