2023 (6) TMI 1238 - AT - Central Excise

Imposition of penalty under Rule 26(2) of the Central Excise Rules, 2002 - Appellant has paid duty of equivalent amount to the government and also filed its ER 1 return timely disclosing all transactions - HELD THAT - The said rule would be applicable in case wherein ineligible Cenvat credit has been passed to recipients in cases without supply of goods and such related transactions - The present case is a case wherein there is no allegation by the department that the appellant has issued invoices without supply of goods. Infact all the transactions have been recorded in ER 1 returns and disclosed by the appellant to the department. Hence, it cannot be understood as to how the penalty under Rule 26(2) of the CER, 2002 can be imposed in such bonafide cases. Further, neither the SCN nor the OIO has brought out any evidence of connivance between the appellant and TIL in the stated transactions. The entire demand of penalty set aside - appeal allowed.

Summary

Issues Involved:
The imposition of penalty under Rule 26(2) of the Central Excise Rules, 2002.

Summary:

Issue 1: Imposition of Penalty under Rule 26(2) of the Central Excise Rules, 2002

The appeal was filed challenging the penalty imposed on the Appellant for passing ineligible credit to a recipient. The Appellant was engaged in clearing specific goods to Tata International Ltd. following the prescribed procedure. The department alleged that the Appellant paid excise duty at a higher rate than applicable, leading to passing of ineligible credit to the recipient. The show cause notice was issued to impose a penalty on the Appellant, which was confirmed by lower authorities.

The Tribunal examined whether the Appellant could be penalized under Rule 26(2) of the Central Excise Rules, 2002 when the duty of an equivalent amount was paid to the government and all transactions were duly disclosed in ER 1 returns. Rule 26(2) pertains to situations where ineligible benefits are passed without the supply of goods. In this case, all transactions were recorded and disclosed to the department, with no allegation of invoices issued without the supply of goods. The Tribunal found no evidence of connivance between the Appellant and the recipient in the transactions.

Therefore, the Tribunal set aside the demand for penalty and provided consequential relief to the Appellant.

(Operative part of the order was pronounced in the open Court.)