Whether imposition of penalty under Rule 26 of Central Excise Rules, 2002 on the co-noticee is tenable in the present case?

PJ/Case Study/2012-13/40

CASE STUDY

Prepared By: CA Neetu Sukhwani,
Arpita Birla &
Kavita Thanvi

Introduction:-

The appellant was served with a Show cause notice wherein it was alleged that the assessee was responsible for facilitating and abetting M/s Punjab Stainless Steel Industries, Delhi (M/s PSSI) to avail the fraudulent rebate of Central Excise duty. It was contended that they issued bogus documents, on the basis of which M/s PSSI has fraudulently taken ineligible rebate under the Central Excise Act, 1944 and Rules made there under. It was alleged that these acts of commission and omission on their part who is supplier of raw materials constitute an offence of the nature described in Rule 26 of the Central Excise Rules, 2002 and so the assessee appears to be liable for imposition of penalty under the provisions of Rule 26 of the Central Excise Rules, 2002.

M/s TRIMURTI STEEL (P.) LTD. v/s Commissioner, Central Excise, Delhi-I
[ORDER- IN-ORIGINAL NO. V (73)15-CE/D-I/Adj/25/2011/1538]

Relevant Legal Provisions:-

Rule 26 of the Central Excise Rules, 2002

Penalty for certain offences. —(1) 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.

(2)   Any person, who issues -
(i)   an excise duty invoice without delivery of the goods specified therein or abets in making such invoice; or
(ii)   any other document or abets in making such document, on the basis of which the user of said invoice or document is likely to take or has taken any ineligible benefit under the Act or the rules made there under like claiming of CENVAT credit under the CENVAT Credit Rules, 2004 or refund, shall be liable to a penalty not exceeding the amount of such benefit or five thousand rupees, whichever is greater.

Issue: - Following issue was made before the Commissioner (Adjudicating Authority):-

Whether imposition of penalty under Rule 26 of Central Excise Rules, 2002 on the co-noticee is tenable in the present case?


Brief Facts:-

The brief facts of the case are that:-

Ø       M/s Trimurti Steel (P.) Ltd. are manufacturer of stainless steel patta patti and ferrous and non-ferrous metals and are registered with the Central Excise department vide registration number AAAFP4223GXM004. They duly file return in ER-1 with the department and audit on their unit has been conducted by the department on regular basis. The impugned show cause notice is a result of wide investigation initiated at the premises of M/s Punjab Stainless Steel Industries, Delhi. Investigations were also carried on at their premises as they were supplying the inputs to the said unit.

Ø       Assessee was regularly supplying the material to M/s Punjab Stainless steel Industries (PSSI) during the period 2004-05 and 2005-06. The assessee was asked to show cause as to why penalty under Rule 26 of the Central Excise Act, 2002 for the said contravention should not be imposed on them. As evident to annexure A to the show cause notice, they have paid Central Excise Duty amounting to Rs. 28,06,897/- during the said period. This clearly shows that they have supplied the material to M/s PSSI vide various invoices and duty is paid on all the invoices. It was the allegation of noticee that against all these supplies they have duly received the consideration which is reflected in their bank statement. Thus, all the transactions were genuine and were duly accounted for. The payments were received through cheque. If the department alleges that only invoices were issued and no goods were supplied to M/s PSSI; it should establish that how the accounts were settled. But it has failed to prove the same.

Assessee’s Contentions:-

Assessee made following submissions before the Commissioner (Adjudicating Authority):-

Ø       The assessee submits that the transactions with M/s Punjab Stainless steel Industries (M/s PSSI) were duly accounted for. They have made regular supply of material to M/s PSSI during the period 2004-05 and 2005-06 and have paid the Central Excise Duty amounting to Rs. 2806897/- during the said period. Against the supply of materials to M/s PSSI the payment has been received through cheque which is reflected in their bank statement. It is not clearly alleged in the impugned show cause notice as to how the accounts were settled between them and M/s PSSI. In this regard, they relied upon the judgment given in the case of CCE, Amritsar v/s M/s Didar Steel Complex (P) Ltd [2009-TIOL-2389-CESTAT-DEL].

Ø       Further they have undergone around 100 transactions with M/s PSSI but the impugned show cause notice is revolving around only few transactions. Out of around 100 transactions, merely 11 transactions have been seen and that too not properly analyzed. The impugned show cause notice is also drafted without proper analysis. This is proved by the fact that there is variation in the particulars mentioned in the show cause notice and the relied upon documents.

Ø       They submit that there are vital differences in the actual facts and those mentioned in the impugned show cause notice. The impugned show cause notice has taken incorrect vehicle no. and carried on investigation accordingly. The vehicle no. as mentioned in the invoices was different than those checked in the register of sales tax check post. Thus, here also, the wrong particulars have been taken and analyzed. Such an investigation based upon incorrect particulars is not legally sustainable and hence the show cause notice is also not viable.

Ø       Further all supplies to M/s PSSI were made in year 2004-05 and 2005-06 after payment of duty. The party has not filed the claim for some invoices on supplies made by them. This is proved from the fact that no notice has been issued to them for those invoices. No bogus invoice will be issued after payment of duty for the supplies on which no benefit accrues to the party. No prudent man will accept the bogus bill on payment of duty if no benefit is arising to him. This proves that they are regularly supplying goods actually after payment of duty to this party. Even this was done prior to clearance in question also. Hence the allegation of bogus supply is totally erroneous and such a show cause notice is void ab initio and non est. In this regard, reliance is placed on the judgment given in the case of The Commissioner of Central Excise v/s Prakash Industrial Corpn [2009-TIOL-1511-CESTAT-MUM].

Ø       The investigating team relating to vehicles has carried out entire investigation on the basis of few invoices. The analysis made by the investigating team brings out the following discrepancies:-
a)      Vehicles have not crossed the sales tax barrier at Shahjahanpur, as no stamp is affixed on the face of GR/bilty.
b)      Vehicles have crossed the sales tax barrier, but the goods inside, were retail goods.
c)       Vehicles have crossed the commercial tax barrier with the plaster therein.
With regard to aforesaid allegations they submit that the allegations raised in the impugned show cause notice are totally baseless. In case of interstate sales, the transport companies often make the arrangements like transshipments. The goods are normally supplied through trucks from the factory. If the same is not full truck load then the transporter takes it to his godown and shifts the material in other trucks and then supply the material. This is normal practice and no prudent transporter will take the half truck load material as it is not economical feasible. As it can be seen in our case also, there is no full truck load. The full truck load is of 16 MT but it is much less in their case. Hence the transshipment of material is normal trade practice by the transporter. Therefore, one truck may carry the goods of more than one party to be unloaded at different places on a particular route. Further, it happens very often that a truck is half empty in the midway, so the goods loaded therein are transferred to some other truck running on the same route. All these are general trade practices adopted by the transport companies and due to these practices, the problems as pointed by the impugned show cause notice occur very often.

Ø       In continuation to above it is submitted that the allegation of the impugned show cause notice that the goods transported by the trucks were “retail goods” is not sustainable. In this regard, it is submitted that the said allegation is based upon the fact that the entry in the register at sales tax barrier is made as “parchoon”. In this respect it is submitted that the word “parchoon” is written for “miscellaneous goods”. This happens when a truck contains a no. of variety of goods of different manufacturers that are loaded in a single truck. Since it is not possible to write the description of each and every goods in a single column of the register, it is written as “parchoon” which means “miscellaneous”. In the cases referred above, this had happened. But the description “parchoon” has been wrongly interpreted by the impugned show cause notice. The word “parchoon” here means “miscellaneous goods” rather than retail goods as mentioned in the impugned show cause notice.

Ø       Further, it is alleged that the goods transported was “plaster”. This is not sustainable as it is also the case where a no. of goods were there in the truck including the Stainless steel patta patti. However, here, majority of the goods were “plaster”. As such, the description in the register was written as plaster. But this does not mean that the truck had carried only plaster, there were other goods too which were stainless steel patta patti. Thus, the contention of the impugned show cause notice is not viable.

Ø       It is also contended that there was no entry in the register at sales tax barrier of Shahjahanpur. Therefore, it was assumed that the truck has not crossed the sales tax barrier. In this regard, it is submitted that there is an alternate route to carry the goods to M/s PSSI. Sometimes goods are carried through this route and in such cases, the stamp of Shahjahanpur check post is not there. But this does not mean that the goods have not been supplied to M/s PSSI. Therefore, the contention of the impugned show cause notice is not sustainable and is liable to be set aside.

Ø       They submit that investigating officers, on the basis of their analysis of few invoices, has simply alleged that the goods mentioned in those invoices have not been actually supplied to M/s PSSI. These allegations are simply based upon the entries mentioned in the register kept at the shahjahanpur check post. As already proved that the investigation is not proper and show cause notice is ambiguous, yet even if it is accepted for the sake of argument also that the goods were not received by M/s PSSI; then where the goods have gone? The copies of GR were available with the invoices, hence the drivers of those trucks should have been interrogated in this matter. But this has not been done. Even if they talk of the sample invoices, the following transport companies were hired –
-          M/s Vikas Road Carrier (8 consignments)
-          M/s Jaishree Roadlines (3 consignments)
Thus, in respect of the 11 sample invoices, 8 were transported by M/s Vikas Road Carrier and 3 by M/s Jaishree Roadlines. As such, the drivers of these transport companies would have been interrogated to bring out the factual position. But their statements have not been taken in the show cause notice. Merely by saying that the goods have not crossed the sales tax barrier is not sufficient. The department should prove if the goods have not crossed the barriers, where have they gone? In order to support their allegation, they should have taken statements of the truck drivers. If the statements of even the truck drivers were in support of their allegations, then their claim would have been substantiated. Thus, the investigating team has not been able to prove their allegation. It is submitted that apart from non-recording of statement of the Transporter, they as supplier have not admitted to issuing of fake invoice without supply of inputs. Also, the vehicle numbers were also not fake. Therefore, it was required by the Investigating Authority conduct a complete investigation as to where the goods cleared from our premises were diverted. And the fact that they have paid the duty of excise of the relevant period and the entire transaction was conducted through the bank also add to the fact that the goods were supplied alongwith the invoices to M/s PSSI and not otherwise.

Ø       It has been decided in various cases that if there is allegation of non-supply of goods, the drivers of the vehicle no. mentioned on the invoices are to be interrogated. Any conclusion derived without taking statements of the truck owners is not viable. In this regard they placed reliance on case law of COMMR. OF C. EX., MUMBAI v/s PRAKASH INDUSTRIAL CORPORATION [2009 (248) E.L.T. 536 (Tri. - Mumbai)]. In the light of the said decision, the show cause notice issued without taking the statements of the truck driver is not sustainable and it should be set aside.

Ø       Further it was submitted that during the period under show cause notice, they have supplied more than 100 consignments to M/s PSSI. For supply of the goods during the said period, they have taken the services of the following transport companies:-
-          M/s Vikas Road Carrier
-          M/s Jaishree Roadlines
-          M/s Jaishree Freight Carriers
-          M/s Pooja Transport Corporation.
Out of the above, more than 80% consignments have been transported by M/s Vikas Road Carriers and rest consignments have been transported by other three transport companies. As already discussed above, the statements of the owners/directors/partners/truck drivers were required to be taken in order to bring out the factual position. But in the show cause notice, out of above, only the statement of Shri Ghanshyam Vyas, manager of M/s Pooja Transport Corporation has been included. In his statement dated 20.02.2007 (RUD-80), he has clearly stated that the goods from M/s Trimurti Steels are transported to M/s PSSI, Delhi. He has specifically stated that the goods are sent on “To pay” basis and the payment is collected from Delhi. Thus, it is ample clear that the goods from M/s Trimurti has been transported to M/s PSSI, Delhi on “to pay” basis. It is also clear that the payment have been collected from consignee, i.e. M/s PSSI as per statement given by the manager. All these facts make it crystal clear that when the payment is collected from M/s PSSI, it is obvious that the goods have also been transported to it as without goods no one will make payment of freight to the transporter. Therefore, this statement affirms their contention that the goods have actually been transported to Delhi and the allegations raised in the impugned show cause notice are void ab initio.
Aligning with this it is reiterated that in their case, more than 80% consignments were transported through M/s Vikas Road Carrier. As such, here the statements of the owner/manager of this transport company would have played a vital role in determining the factual position. But in the entire show cause notice, there is no reference of the fact that the statement of these persons have been taken. However, while going through the statement of Shri Harvinder Singh Sarna, Partner of M/s PSSI (RUD-64), it is found that the statements of the following parties have also been taken:-
-          Statement of Shri Ramesh Boob, director of M/s Vikas Road Carrier (P) Ltd. recorded on 19.07.2007.
-          Statement of Shri Ashok Kumar, Manager of M/s Vikas Road Carrier (P) Ltd., Delhi recorded on 19.07.2007.
-          Statement of Shri Manmahendra, Proprietor of M/s Jayshree Road Lines recorded on 20.02.2007.
-          Statement of Shri Mangla Ram, proprietor of M/s Jai Shree Freight Carrier recorded on 20.02.2007.
Ø       In the aforesaid RUD-64, Shri Harvinder has demanded the copies of these statements to go through minutely. By reading this statement of Shri Harvinder, it seems that the investigating officers have also taken the statements of their transporters. But to their utter surprise, this fact has not been mentioned anywhere in the entire show cause notice. What does this means? Whether these statements were supporting their case and were against the department. It seems that these persons have told the correct situation which was in favour of the assessee. Thus, in order to strengthen their case, while drafting the show cause notice, these statements have not been included therein by the department. This is not justified. While framing the show cause notice, all the facts and statements are to be included and analyzed in order to find out the actual situation. But this has not been done. Only those statements which were in favour of the department have been included and rest have been ignored. All these make it ample clear that the impugned show cause notice is not proper and is liable to be withdrawn. In this regard, reliance is placed on the decision given in M/s Subhnen Décor Pvt Ltd v/s Commissioner, central Excise, Vapi [2010-TIOL-125-CESTAT-AHM].

Ø       Further in the show cause notice it is alleged that they did not produce the documents in support of their claim to show that the goods were actually transported through relevant vehicle. This is totally wrong analogy of the DGCEI. The onus is on the DGCEI to prove that the goods were not actually transported through these vehicles. This was investigation and the department has to collect evidence in support of their allegation. Asking them to prove that they have not transported the goods or collect the evidence is totally erroneous, illogical and illegal. They have written the vehicle number and transporter name on the face of invoice, this itself clear their stand that they have transported the goods through these vehicles. If the department is of the view that the noticees have not transported the goods then they should prove the same with corroborative and cogent evidence which has been done in case of other parties. No such evidence has been produced or alleged in show cause notice. It has been held by various appellate authorities that the assessee cannot be asked to prove the negative, onus is on the department to prove its allegations. In this respect, reliance is placed upon following decisions:-

-          CC Chennai v/s M/s Flemingo (DFS) Pvt Ltd [2010-TIOL-60-HC-MAD-CUS]
-          M/s Monarch Metals Pvt Ltd v/s CCE, Ahmedabad/Bhavnagar [2009-TIOL-1936-CESTAT-AHM]
-          K. Harinath Gupta vs Collector of Central Excise, Hyderabad [1994 (71) ELT 980 (Tribunal)
-          Icycold Commercial Enterprise vs. Collector of C. Ex., Calcutta-I [1994 (69) ELT 337 (Tribunal)]

In the light of above decisions, it is ample clear that the onus lies on the department to establish their charge. The assessees cannot be asked to prove the things that are against them. In their case also, the department is liable to prove that the goods were not transported and the fake invoices were issued. It is further submitted that they have acted in bona fide manner and have acted in accordance with law in supplying the finished goods to the main accused M/s PSSI under genuine sale bill and have transported the goods under bilty/consignment notes through genuine and existing Goods Transport Agency. Even the vehicle number is also proper. All the goods have been supplied after payment of duty. The department is failed to establish the case against them. They have provided all the information and appeared before the authorities from time to time. Hence the allegation of issue of bogus invoice is totally baseless and unwarranted. Therefore, the penalty under Rule 26 proposed to be imposed on them should be set aside and the show cause notice issued to them should be quashed.

Ø       Further, M/s PSSI had exported the goods to claim rebate. If the goods are not received by the party then from where they have purchased the goods and manufactured them and exported the same. The export takes place through custom authorities. No such allegation is that the export was fake. Hence when the export has taken place in actual then from where the said party has purchased the material? No findings have been submitted by the impugned show cause notice. It has been held by Hon’ble Delhi Tribunal in a similar case that where the non receipt of inputs is alleged it should be supported by the findings about the manufacture of goods and their removal, else the demand is not sustainable. This decision was given in the case of B.M.A. ZINC PVT. LTD. Versus COMMISSIONER OF CENTRAL EXCISE, JAIPUR [2005 (191) E.L.T. 792 (Tri. - Del.)]. In the present case also, the show cause notice has alleged that the goods were not received by M/s PSSI. If the assessee’s goods were not received by them, then from where have they received the inputs and manufactured their final products that were exported. Further, if their goods were not supplied to M/s PSSI, then to whom those goods were supplied or diverted to? The impugned show cause notice is silent about these questions. Hence the complete investigation is poor and the department is not able to prove their case. Therefore, the show cause notice which is based upon poor investigation is not tenable and is liable to be quashed. Hence the penal action should be dropped. Reliance is placed on the decision given in the case of M/s Hiren Aluminium Ltd v/s CCE, Valsad [2009-TIOL-433-CESTAT-AHM].

Ø       It is submitted that when the proceedings are carried out against the main noticee and the penalty is imposed on the co-noticees, it should be supported by the corroborative evidences. Merely because the co-noticee had transaction with the main noticee cannot be a ground to impose penalty on the co-noticee unless their role in modus operandi is proved by cogent and corroborative evidences. This has been decided in the case of M/s Sunshine Overseas (100% EOU) Vs CC & CCE, Rajkot [2011-TIOL-770-CESTAT-AHM] which was made against an EOU for diversion of duty free material to local market. The assessee was made co-noticee and it was alleged that they have received those diverted duty free material and penalty was proposed under rule 26 of the Central Excise rules, 2002 on them. However, it was held that the penalty is not sustainable on the co-noticees without any corroborative evidences. This is similar to the present case. They are the co-noticee to the case and the allegations raised on them for assisting the main noticee have not been proved. As such, penalty proposed against them is not sustainable in the light of the said decision.

Ø       It was also submitted that the impugned show cause notice is proposing to impose personal penalty under rule 26 of the Central Excise rules, 2002 on the director of the company without proving the specific omission and commission on his part. The fact that the show cause notice has not brought out fault on part of the noticee is proven by the following facts:-

·          The statement of a no. of persons have been taken, some of which has become part of this show cause notice. But none of the person, neither anyone from M/s Punjab Stainless Steel Industries (which is the main convict), nor any other person has specified the name of noticee in his statements. If the noticee was associated in any ways, whether directly or indirectly, his name would have appeared in the statements of the main or supporting victims. Since neither his name has arisen during the investigation in the statements of the main or associated convicts nor the show cause notice has brought any specific omission and commission on his part, it is self proven fact that the noticee was not the part of the modus operandi carried out by the main convict.

·          The entire show cause notice states the name of company wherever it comes to allegatory statements. The name of director has been specified nowhere when it comes to raising allegations. It is only at the time of closing of the show cause notice when it comes to showing cause, the name of the noticee has been specified alongwith the name of the company to show cause as to why penalty under section 26 should not be imposed upon them.

·          The allegations are raised against the company, and that too are not proven and ultimately the show cause notice has turned out to be collection of allegatory statements which are not proven at any stage. This fact is detailed in the separate reply to show cause notice already filed by the company to your good office. Thus, when the penalty on the company itself is not imposable, the question of imposing the penalty on director does not arise at all.

·          Even if the allegations are accepted against the director, then too, the allegations are not proved. Wherever it comes to imposition of penalty, the same should be backed by the relevant facts showing the specific omission and commission on part of the defaulter, merely because the noticee is the director of the company whose goods were utilized by the main convict, it cannot be the sole ground for imposition of penalty.

In the light of above it is ample clear that the director was not involved anywhere in the modus operandi carried out by the main convict. Also, this fact is not proved by the impugned show cause notice by showing the specific involvement of the noticee. Penal provision can’t be invoked unless the specific allegations are made to justify the same. And whereas the impugned show cause notice has not brought any specific commission or omission on part of the director of the company. Therefore, the impugned show cause notice is not sustainable and is liable to be quashed.

Ø       In continuation to above, it has been held by various Appellate Authorities that where there is neither any finding nor any allegation in show cause notice regarding particular commission or omission on part of director which shows that he was actively involved in the malfunctioning, the personal penalty is not imposable. Reliance is placed on following case laws in this regard:-
a.      COMMISSIONER OF CUSTOMS, ICD,TDK, NEW DELHI Versus CYBER EXPRESS PVT. LTD. 2004 (172) E.L.T. 388 (Tri. - Del.):-
b.      COLLECTOR OF C. EX., NEW DELHI versus NEW TOBACCO COMPANY LTD. 2001 (134) E.L.T. 176 (Tri. - Kolkata) :-
c.       BIJENDRA KEDIA Versus COMMISSIONER OF CUSTOMS (P), CALCUTTA 2001 (133) E.L.T. 791 (Tri. – Kolkata):-
Thus, penalty is not imposable on the director when the show cause notice does not bring out any specific involvement of the director. Reliance also placed on case laws cited as under:-
·          CCE, Meerut v/s Rakesh Singhal [2007 (208) ELT 432 (Tri.-Del.)]
·          S.K. & Company (P) Ltd, v/s CCE, Rohtak [2006 (203) ELT 137 (Tri.-Del.)]
·          Shrikant Processors (P) Ltd. v/s CCE, Jaipur [2006 (203) ELT 98 (Tri.-Del.)]
·          S.M. Telesys Ltd. v/s CCE, Jaipur [2006 (201) ELT 275 (Tri.-Del.)]
·          India Medtronics Pvt. Ltd. v/s CCE, Vadodara [2006 (199) ELT 347 (Tri.-Mumbai)]
·          Somaiya Shipping Clearing Pvt. Ltd. v/s CCE, Mumbai [2006 (197) ELT 552 (Tri.-Mumbai)]
·          Calton Instruments (P) Ltd. v/s CCE (Appeals), Delhi-II [2004 (165) ELT 174 (Tri.-Del.)]
·          Weston Components Ltd. v/s Commissioner of Customs, New Delhi [2000 (118) ELT 199 (Tribunal)]
·          Garware Synthetics v/s CCE, Pune [2000 (116) ELT 608 (Tribunal)]
·          Lakshmi Packaging (P) Ltd. v/s Commissioner of Central Excise & Customs, Coimbatore [1998 (98) ELT 91 (Tribunal)]

In the aforementioned case laws, it has been held by various Appellate Authorities that when the show cause notice does not refer any specific act on part of authorized signatory which tantamount to suppression of facts or duty evasion, penalty cannot be imposed on him. In the show cause notice nothing has been mentioned that specifically proves that the director has knowingly done such act which attracts the penalty under Rule 27 of the Central Excise Rules, 2002. Therefore, the show cause notice is not justified and is liable to be set aside and no penalty is imposable on the director.

Ø       It is further submitted that the impugned Show Cause Notice has already imposed the penalty on the company. If penalty is alleged to be imposed on the company, it should not be imposed on the director separately. This view has been taken by the hon’ble Tribunal in the case laws cited below:-
a.            Silkon Silk Mills (Exports) Ltd. v/s Commissioner of Customs-II, Bombay [1997 (89) ELT 151 (Tribunal)]
b.            Globe Rexine Pvt. Ltd. v/s CCE, Chennai [2006 (4) STR 340 (Tri.-Chennai)]
In the aforesaid cases, hon’ble Tribunals have set aside the penalty on the Director saying that penalty cannot be imposed on two persons separately for the same act as alleged in the show cause notice. Since, these cases are equally applicable in instant case, thus considering the ratio of above, the show cause notice should be withdrawn and no penalty should be imposed on the director.

Ø       It is also submitted that the company has already filed a separate reply to the show cause notice. That reply proves the bonafides of their case and it justifies that the company was not associated with the main convict in the modus operandi. They were genuinely selling the goods under the cover of proper invoice. Merely because they were seller of goods to the main victim, cannot be the sole ground for invoking the penal provisions. Since the reply filed by the company justifies their case and also the impugned show cause notice has failed to bring out specific omission and commission on their part, the personal penalty under section 26 is not imposable. The impugned show cause notice should therefore be quashed.

Reasoning of the Adjudicating Authority:-

The Commissioner finds that it is a case of DGCEI that the transport documents pertaining to the purported supply of raw material were having one infirmity or the other. However as seen from the impugned show cause notice there are invoices/transport documents pertaining to the noticee firm in which the description of goods were found to be not matching with the goods purported to be carried in the vehicle. The non-receipt of the raw material covered under these documents has also been proved by corroborative evidences such as statements of various persons as mentioned as also on the various reports from the reports received from various agencies. Thus it is incorrect to say that all the transport documents pertaining to the supplies made by the noticee to PSSI were in order.

Further they held that various judgments relied upon by the noticee in their defence are not applicable to the present case. As such it was held that the noticee, M/s Trimurti Steels Pvt Ltd and Shri Dulput Daga, Director of M/s Trimurti Steels Pvt Ltd are responsible for facilitating and abetting M/s. PSSI to avail the fraudulent rebate of Central Excise Duty as they issued such bogus documents, on the basis of which M/s PSSI has fraudulently taken ineligible rebate under the Central Excise Act, 1944 and Rules made thereunder. By these acts of omission & commission they facilitated the buyer to avail inadmissible rebate claim. Further where an assessee issues only invoices without actual movement of excisable goods, in order to enable buyer to fraudulently avail the inadmissible rebate claim, he stands to be an effective abettor with full knowledge of the offence committed by him and therefore commits an offence of the nature described in Rule 26 of Central Excise Rules, 2002 and as such the noticee here are liable to penalty under the said Rule.

Decision:- The penalty of Rs. 10,000/- was imposed on the noticee.

Conclusion:- The analogy drawn from this case is that sometimes it happens that the assessee becomes victim of the fraud committed by others merely on account of some genuine transactions being entered with the main noticee. In this case also, the assessee was not involved in the fraud but since they supplied material to the main noticee of which there were doubts as regards few transactions, they were held liable for penal action of insignificant amount under Rule 26 so that they are careful in future and are aware of their liability in such circumstances in future. Further, as the penalty amount was very small, the appellant did not appeal further but appellant had a strong case in its favour.

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