Imposition of Penalty under Rule 26 of CER, 2002 on issue of false invoice to third party

PJ/Case Laws/2012-13/1093

Case:COMMISSIONER OF CENTRAL EXICSE, AHMEDABAD V/S NAVNEET AGARWAL

Citation:2012 (276) E.L.T. 515 (TRI. – AHEMDABAD)

Issue:- Whether an assessee can be made liable to pay penalty under Rule 26 of the Central Excise Rules, 2002 for issuing false invoice to third party?

Brief Facts:- M/s Shri Ram Tubes Pvt. Ltd was engaged in the manufacture of copper tubes and have availed cenvat credit of Rs. 23, 26, 834/- against 10 invoices issued by M/s Annapurna Impex Pvt. Limited.On investigation it was found that no goods were supplied by M/s Annapurna Impex Pvt. Limitedand only invoices had been issued.

Proceedings were initiated and Original Adjudicating Authority imposed penalty of Rs. 5 lakh on Shri Navneet Agarwal under Rule 26 of the Central Excise Rules, 2002 and under Rule 13 of Cenvat Credit Rules 2002.

In appeal filed by Shri Navneet Agarwal, it was held by the Commissioner (Appeal) had issued only invoices and did not deal with the goods and therefore, penalty under Rule 26 of the Central Excise Rules, 2002 cannot be imposed on him. Further, the Commissioner (A) also of view that imposing the penalty did not have jurisdiction.

Against the said decision, Revenue is in appeal before the Tribunal.

Appellant’s Contention: - Revenue submitted that the Commissioner (Appeal) had relied upon the decision of the Larger Bench of the Tribunal in the case M/s. Steel Tubes Limited [2007 (217) E.L.T. 506 (Tri.-LB)to take the view that penalty was not imposable under Rule 26 of CER, 2002 as the respondent had not dealt with the goods. It was submitted that same issue has been raised before the Punjab & Haryana High Court and in case of M/s. Vee Kay Enterprises v. Commissioner of Central Excise [2011 (266) E.L.T. 436 (P & H), the High Court took a view that penalty under Rule 26 of Central Excise Rules, 2002 is imposable even before introduction of Rule 26(2), which specifically provide for imposition of penalty in the cases where invoices are issued without delivery of goods specified therein.

Reasoning of Judgment:- The Tribunal perused the provisions of Rule 25and 26 of the Central Excise Rules, 2002. The Tribunal also perused the judgment of the High Court in M/s. Vee Kay Enterprises v. Commissioner of Central Excise.

The Tribunal noted that the High Court had taken the view that when a person was concerned in selling and dealing with goods which were liable to confiscation under Rule 25(1)(d), Rule 26(1) is also applicable. It was noted that in the present case also, as in the case of M/s. Vee Kay Enterprises, the appellant claimed to have sold goods in respect of which cenvat credit was taken. The High Court had observed that a 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. In view of the decision of the High Court of Punjab & Haryana, the decision of the Larger Bench of the Tribunal cannot be followed. Moreover, the decision of the High Court is subsequent to decision of the Larger Bench. Further, the High Court has clearly held that penalty is imposable even prior to amendment of Rule 26 by inserting Rule 26(2) of Central Excise Rules, 2002. Impugned order set aside.

Decision:- Appeal allowed.

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PJ/Case Laws/2012-13/1093

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