2010 (2) TMI 606 - AT - Central Excise

Cenvat credit - wrong availment of Cenvat credit - without receiving the goods and paid the duty before issuance of the show cause notice - appellants are given an option of the reduce penalty to Rs. 25% of the duty confirmed giving the benefit of proviso to Section 11AC if the appellant pays the same within 30 days of the communication of this order - only contention of the appellant is that the appellant has not dealt physically with the impugned goods and in that situation no penalty under Rules 26 of the Central Excise Rules 2002 can be imposed on the appellant and there is no allegation against the appellant the only allegation against the appellant company only - officer to issue the show cause notice and adjudicated the goods was not having any jurisdiction and there is no finding about the liability of confiscation of the goods and moreover that the submission of the appellant is that they sold the scrap on ex-factory basis and delivered to the purchasers at the factory gate on payment of duty in that event the appellants are not liable for any penalty Held that - appellant has sold the goods through online process and on ex-factory basis and on ex-factory basis and delivered the goods to the purchasers at factory gate on payment of duty - goods against this invoices were never moved - vehicle number entered in the invoices were NOT correct and the statement of truck owner that the vehicle mentioned in the invoices never entered in the factory premises of the appellant and the statement of the truck owner was not contravorted by the appellant - duty of the supplier of goods to enter the correct number of vehicles in their invoice while clearing the goods and in this case the vehicles which are mentioned in the invoice did not carry the goods at the time of clearance - appellant cannot escape from the liability of penalty.

Issues Involved:
1. Fraudulent availment of Cenvat Credit by M/s. Nasik Strips Pvt. Ltd. (NSPL).
2. Imposition of penalty on the Director of NSPL under Rule 26 of the Central Excise Rules, 2002.
3. Imposition of penalty on M/s. Akshar Trading Co., M/s. Master Traders, and M/s. Memon Associates under Rule 26.
4. Imposition of penalty on JSW Steel Ltd. and the jurisdiction to adjudicate the case.

Detailed Analysis:

1. Fraudulent Availment of Cenvat Credit by M/s. Nasik Strips Pvt. Ltd. (NSPL):
The core issue revolves around NSPL availing Cenvat Credit on HR Trimmings scrap without physically receiving the goods. The adjudicating authority confirmed the demand of inadmissible credit availed and utilized by NSPL. The appellant, NSPL, admitted to the wrong availment of Cenvat credit and paid the duty before the issuance of the show cause notice. Consequently, the tribunal confirmed the duty demand and penalty under Section 11AC but allowed NSPL the option to reduce the penalty to 25% of the duty confirmed if paid within 30 days, following the precedent set in K.P. Pouches Ltd. v. Union of India.

2. Imposition of Penalty on the Director of NSPL under Rule 26 of the Central Excise Rules, 2002:
The Director of NSPL, Shri K.K. Agarwal, was penalized under Rule 26 for his involvement in the fraudulent availment of Cenvat credit. The appellant argued that no penalty should be imposed as he did not physically deal with the goods. However, the tribunal, citing the case of Dr. Writer's Food Products, upheld the penalty, stating that physical handling of goods is not a prerequisite for imposing a penalty under Rule 26 if the person is involved in the fraudulent activity.

3. Imposition of Penalty on M/s. Akshar Trading Co., M/s. Master Traders, and M/s. Memon Associates under Rule 26:
The penalties on these firms were upheld by the tribunal. The appellants contended that Rule 26 permits imposing penalties on individuals, not firms. However, the tribunal referenced the case of Shrishti Impex Pvt. Ltd. v. Commissioner of Central Excise, Thane-I, and other precedents, determining that corporate bodies can be penalized under Rule 26. The tribunal found that these firms actively participated in the fraudulent scheme to extend inadmissible credit to NSPL without delivering the goods.

4. Imposition of Penalty on JSW Steel Ltd. and Jurisdiction to Adjudicate the Case:
JSW Steel Ltd. challenged the penalty on grounds of jurisdiction and the absence of findings on the liability of confiscation of goods. The tribunal dismissed these arguments, citing the case of Varun Shipping Co. Ltd. v. Deputy Collector of Customs, which established that if part of the cause of action arises within the jurisdiction, the adjudicating authority has the right to adjudicate. The tribunal also found that JSW Steel Ltd. was complicit in the fraud, as evidenced by incorrect vehicle numbers on invoices and statements from truck owners indicating that the vehicles did not transport the goods to NSPL. Consequently, the penalty against JSW Steel Ltd. was confirmed.

Conclusion:
The tribunal upheld the penalties imposed on all appellants, confirming the fraudulent nature of the transactions and the involvement of all parties in the scheme to avail inadmissible Cenvat credit. The appeals were disposed of with these observations, and the penalties were confirmed as per the detailed analysis provided.

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