2023 (3) TMI 294 - AT - Central Excise

Levy of penalty u/s 26 of CER - supply of invoices without supply of capital goods - whether, based on the evidence available on record, it can be said that the appellant had not supplied the capital goods to M/s Crest Steel Power Pvt. Limited in 2012 and only supplied invoices - HELD THAT - It is undisputed that no investigation whatsoever was conducted at the end of the appellant. The appellant was not even asked if it had supplied the goods or not. If documents indicated that the goods have been sent and the ledgers of M/s Crest Steel Power Pvt. Limited indicated that it has engaged the transporter, the mere fact that at the time of verification, the goods could not be found, by itself, does not prove that the appellant did not supply the goods. The goods were not found during panchnama but the goods could have been removed by M/s Crest Steel Power Pvt. Limited, after they were purchased. The investigation was conducted five years after the goods were supplied. Once the goods were supplied by the appellant, they are beyond its control. Inconsistency in the invoices ledger of the transporter also does not carry the case of the Revenue any further because transportation was the responsibility of the buyer and not of the appellant. There is no evidence that the appellant returned any cash to M/s Crest Steel Power Pvt. Limited in any form and by any means. If the appellant has not supplied the goods, it should not have received any payment. If there was any fraud and the appellant was only issued invoices and received payment by cheque, naturally M/s Crest Steel Power Pvt. Limited would want the money to be returned. Neither is there any evidence nor is there any allegation to this effect. Thus, based on the evidence available on record, the imposition of penalty under Rule 26 of the Central Excise Rules, 2002 upon the appellant cannot be sustained - appeal allowed.

Summary

Issues:
1. Imposition of penalty under Rule 26 on the appellant.
2. Time limit for imposition of penalty.
3. Evidence of supply of capital goods to the buyer.
4. Responsibility for transportation of goods.

Imposition of Penalty under Rule 26 on the Appellant:
The case involved the appellant, a manufacturer of machines for rolling mills, who supplied parts of rolling mills to a buyer. The Department received intelligence that the buyer availed inadmissible cenvat credit based on invoices from the appellant without receiving the goods. The Additional Commissioner passed an order denying cenvat credit, ordering recovery, and imposing a penalty under Rule 26 on the appellant. The appellant contested the penalty, arguing that the show cause notice was beyond the limitation period and that no investigation was conducted at their end. The appellant's defense highlighted the lack of evidence against them and emphasized that they had received payments through cheques only, with no allegations of cash returns to the buyer. The appellant also stressed that they were not responsible for the buyer's record-keeping or use of capital goods in their factory.

Time Limit for Imposition of Penalty:
The appellant contended that the penalty imposed under Rule 26 was not sustainable due to the show cause notice being issued beyond the limitation period of five years. They cited relevant case laws to support their argument. The appellant emphasized the absence of any investigation by the Department at their end and questioned the basis for imposing the penalty solely on physical verification of goods sold years earlier. The appellant argued that they should not be held accountable for the buyer's actions post-sale, including transportation and maintenance of goods.

Evidence of Supply of Capital Goods to the Buyer:
The Department initiated action based on intelligence that the buyer received invoices without receiving the capital goods. The Department conducted physical verification at the buyer's premises and found discrepancies between the documents and the actual presence of goods. The Department highlighted that the buyer's denial of non-receipt of goods lacked substantiating evidence, and discrepancies were noted in the transportation records. The Department argued that the appellant only supplied invoices without the actual goods, justifying the imposition of the penalty under Rule 26.

Responsibility for Transportation of Goods:
The appellant clarified that they sold the goods at the factory gate, and transportation was arranged by the buyer through a transporter. The appellant emphasized that the transportation arrangements and payments were the buyer's responsibility. The Department pointed out discrepancies in the transportation records, indicating that the goods were not transported to the buyer as per the invoices. The Department argued that the absence of goods during verification, coupled with discrepancies in transportation documentation, supported the imposition of the penalty on the appellant.

In the final judgment, the Tribunal considered the evidence on record and concluded that the imposition of the penalty under Rule 26 on the appellant was not sustainable. The Tribunal highlighted the lack of direct evidence against the appellant and emphasized that the appellant's responsibility ended upon selling the goods at the factory gate. The appeal was allowed, setting aside the penalty imposed on the appellant with consequential relief granted.