- (1.) This order will dispose of CE As No. 7 and 105 of 2010 as it is stated by learned Counsel for the parties that questions of law involved in both the appeals are identical.
(2.) CEA No. 7 of 2010 has been preferred by the Assessee under Section 35G of the Central Excise Act, 1944 against order dated 4.9.2009 passed by the Customs, Excise and Service Tax Appellate Tribunal, New Delhi (for short "the Tribunal") claiming following substantial questions of law: i) Whether the Ld. Tribunal has passed the impugned order in violation of principle of natural justice? ii) Whether penalty under Rule 25 can be imposed by invoking ingredients of Rule 26? iii) Whether penalty prior to March, 2007 can be imposed upon a dealer when specific provision was inserted in Rule 26 w.e.f. 01.03.2007? iv) Whether penalty under Rule 25(1)(b) and 25(1)(d) can be imposed upon a dealer? v) Whether it is justified to impose penalty equivalent to the amount of CENVAT Credit when the same amount of penalty has been imposed upon the user of credit?
(3.) The Assessee is a registered dealer under the provisions of Central Excise Act, 1944 ( for short "the Act"). It came to light during investigation that the Appellant was party to fraud in enabling credit to be taken for the duty paid without actual receipt of material which was a condition precedent for availing of CENVAT credit as per CENVAT Credit Rules, 2004. After considering the matter, order-in-original dated 7.1.2009 was passed raising demand of duty after disallowing the CENVAT credit and imposing penalty under Rule 25 of Central Excise Rules, 2002. The Adjudicating Authority levied penalty not only on the dealer wrongly availing CENVAT credit but also on the Appellant who by issuing fake invoices, facilitated the evasion of duty by wrongful availment of CENVAT credit. The said penalty was equal to the value of duty. The plea of the Appellant was that it did not take CENVAT credit itself and only issued invoices on the basis of which two manufacturers, namely, M/s Kay Iron Works (Jorian) Pvt. Ltd., village (Jorian), Yanuna Nagar and M/s United Chain Industries, earlier situated at E-17, Industrial Area, Yamuna Nagar and now at village (Jorian), Yamuna Nagar took the CENVAT credit. Further plea was that under Rule 26(2) a person issuing excise duty invoice without delivery of the goods was also liable to pay penalty to the extent of the amount of benefit taken, the said provision was added with effect from 1.3.2007 which was after the allegedly wrongful act of the Appellant. These contentions were not accepted and the Appellant was held liable to pay penalty equal to the amount of alleged evasion of duty. The Appellate Authority i.e. the Tribunal observed: 15. There could be no dispute on the proposition that the penal statue cannot be applied retrospectively. In respect of persons whose activities are clearly covered by the provisions of Rule 25, the penalties are imposable under the said Section. As regards penalty imposed on the persons under Rule 26, as their role is covered under unamended Rule 26 ( i.e. 26(1) in the present form), even before the amendment, the penalties on these persons are sustainable. Therefore, it is not a case of retrospective application of penal provisions. 16. The reliance is being placed on the decision of the Larger Bench in the case of Steel Tubes of India Ltd. reported in, 2007 (217) ELT 506. In the said decision it has been held that the Assessee was only issuing invoices and there was no movement of goods, and therefore, they cannot be visited with penalty under Rule 209A. The said decision of the Tribunal relies on the judgment of the Hon'ble High Court of Bombay in the case of Jayanthilalk Thakker and Company reported at, 2006 (195) ELT in which it was held that the Chartered Accountant and the law firm could not be held to have dealt with the goods "in any other manner" attracting the provisions of Rule 209A of the Central Excise Rules. From the facts disclosed in the order, there is no indication as to whether there were any goods at all involved, whether there was payment of sale consideration or there was any commission involved. The findings of the Tribunal in the said case that a person cannot transport without taking possession are unexceptionable. But the taking over of physical possession in respect of other activities like purchase or sale is not always necessary. Let us consider a case of an import by an India based importer who sells the goods imported by him or high sea sale basis; the orders for import could be placed without even seeing the goods; the goods could be transported by ships and sale takes place on high sea sale basis. In such cases, the party who sells on high sea sale basis has purchased and sold but he has not taken possession or transported. It is a common knowledge that there are similar situations in domestic transactions of selling or purchasing. A Delhi based trader may order a consignment in Mumbai, but may transfer the consignment by sale to a party in Chennai and he may not take physical possession or be concerned about transporting. 16.2 The reliance has been placed on the extract from principles of statutory interpretation by Justice G.P. Singh, regarding retrospective operation of penal statutes and a submission was made that Rule of construction against retro activity of penal loss is not restricted to acts providing for criminal offences but applies also to laws which provides for other penal consequences of a severe nature. As we have held that the action of these two manufacturers Appellants attract the provisions of Rule 14 and 15 of CENVAT Credit Rules read with Section 11AC, there is no retrospective application of penal provisions in their case. Similarly, as we have held that in respect of registered dealers, the Rule 25 of the Central Excise Rules is applicable there is no retrospective application of penal provision in respect of such dealers. 16.3 The reliance placed on the decision of the Hon'ble High Court of Kerala in Kallatra Abbas Haji cited supra relating to non-reliability of retracted confession of co-accused is not relevant as in the facts of the present cases the registered dealers, the transporters, the two manufacturers and the ultimate users have corroborated version of each other. The other evidence like banking transaction also corroborated the submissions of these parties.;