Whether penalty under Rule 26 imposable for issuing invoice without delivering goods?

PJ/CASE LAW/2015-16/2816

Case:-DUGGAR FIBER PVT. LTD. VERSUSCOMMR. OF C.EX. & S.T., DELHI

Citation:-2015 (322) E.L.T. 763 (Tri. - Del.)

Brief facts:-The appellants are in appeals against the impugned order imposing penalty under Rule 26 of the Central Excise Rules, 2002.
The facts of the case are that an investigation was conducted at the end of the manufacturer buyer to whom the main appellant issued invoices. The allegation of the Revenue is that as the transporting vehicle are not capable of transporting the goods, therefore, it was alleged that main appellant has issued only invoices and not supplied the goods to the manufacturer buyer as the manufacturer buyer has admitted the same. Therefore, penalty under Rule 26 of the Central Excise Rules 2002 was proposed for the invoices issued during the period December, 2004 to January, 2005. Both the lower authorities imposed the penalty on both the appellants. Aggrieved from the said order appellants are before tribunal.

Appellant’s contention:- The ld. Consultant appearing on behalf of the appellant submits that in this case invoices have been issued during the period December, 2004 to January, 2005 and show cause notice has been issued on 5-12-2005 by invoking extended period of limitation. Therefore, penalty is not imposable. He further submits that during the relevant period the provisions of Rule 26(2) of the Central Excise Rules, 2002 were not in the statute to impose the penalty on the appellant. Therefore, penalty is not imposable as, as per the allegation of the Revenue the appellants have not dealt with the goods. To support his contention he relied on the decision of this Tribunal in the case of Shri Ram Bilash Bansalv. CCE, Chandigarh vide Stay order No. 535/2009 dated 12-6-2009 = 2009 (247)E.L.T.200 (T). He further submits that on merits also the allegation of the Revenue is that the appellant has not supplied the goods as the vehicles which have transported the goods either is not having the capacity to transport the goods or the vehicle was a stolen vehicle which is mentioned in the invoices. For that he submits that over loading is a common phenomena for transportation of the goods. Therefore, same cannot be a reason for concluding that vehicle has not transported the goods. For stolen vehicle it is submitted that it is not in the knowledge of the appellant that vehicle was stolen and in their statement they have categorically stated this fact. Therefore, penalty is not imposable.

Respondent’s contention:- On the other hand, ld. AR oppose the contention of the ld. Counsel and submits that in this case on limitation the show cause notice can be issued within five years from the date of knowledge and admittedly in this case show cause notice has been issued within five years of the date of knowledge. Therefore, extended period of limitation is invokable. For imposition of penalty under Rule 26 he submits that the appellants are selling the goods in question. Therefore, penalty under Rule 26 can be imposed. On merits he submits that as it is admitted by the appellant themselves, the vehicle was stolen and therefore, goods cannot be transported by the vehicle. Moreover, the buyer in his statement has categorically stated that they have not received the goods and received only the invoices. Therefore, penalty imposed on the appellants are rightly imposed.

Reasoning of judgment:-In this case penalty has been imposed on the appellants under Rule 26 of the Central Excise Rules, 2002 which is having the following provisions :
“Rule 26. Penalty for certain offences. - Any person who acquires possession of, or is 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 under the Act or these rules, shall be liable to a penalty not exceeding the duty on such goods or two thousand rupees, whichever is greater.
Note : Quantum of penalty during different period

Rate	Date from	Date upto
Not exceeding the Duty or Rs. 10,000/- whichever is greater	1-3-2002	11-5-2007
Not exceeding the duty or Rs.2000/- whichever is greater	11-5-2007	Till date

On plain reading of the said provisions it is clear that any person who is dealing with the excisable goods in any manner is liable to be penalized under Rule 26 of the Central Excise Rules, 2002. As per the allegation alleged against the appellants it is clear that appellants were not dealing with excisable goods and only issuing the invoices.
To impose penalty the person who is issuing the invoices without delivering the goods the provisions under Rule 26 ibid has been introduced w.e.f. 1-3-2007. Admittedly, during the period when the appellants have issued invoices the said provisions was not there. Therefore, penalty under Rule 26 of the Central Excise Rules, 2002 is not imposable on the appellants under the old provisions relating to the impugned period.
Therefore, they set aside the penalty and allow the appeals with consequential relief, if any.

Decision:-Appeals allowed

Comment:-The analogy of the case is that during the period from December, 2004 to January, 2005, the person issuing invoices without delivering goods was not leviable to penalty under Rule 26 of the Central Excise Rules, 2002 as during that time, penalty under Rule 26 was imposable only if person dealt with excisable goods in improper manner. As issuing invoices without delivering goods did not involve dealing with excisable goods, penalty was set aside.

Prepared by:- Monika Tak

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PJ/CASE LAW/2015-16/2816

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