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2025 (6) TMI 180 - AT - Central ExciseLevy of penalty on the appellant under Rule 26 of the Central Excise Rules 2002 - abetted and facilitated one of the assessees in availing and utilizing unavailable/irregular CENVAT Credit which was found to be highly excessive as compared to past periods - HELD THAT - In this case the ld. adjudicating authority has observed that the scope of review and correction by the appellant was limited to the correction of errors apparent on record and not to make changes to substantial data such as quantity of goods and CENVAT Credit. Hence it has been held by the ld. adjudicating authority that the correction in the E.R.-1 Return already filed by the said assessee made by the appellant was beyond his mandate. The appellant made changes to the opening balance of the CENVAT Credit account of September 2016 just because he could not revise the E.R.-1 Return of August 2016. This confirms his actions to be in collusion with the said assessee and somehow allow them extra CENVAT Credit leading to evasion of central excise duty on their goods and also passing on excess CENVAT Credit to the buyers. Considering the fact that disciplinary action has been initiated against the appellant and while dealing with the disciplinary action it has been observed that the act or omission on the part of the appellant were not deliberate but rather were taken under a bona fide belief that the assessee s intimation was correct as there is no allegation for any extraneous consideration for such act or omission and thus the allegation of contravention of Rule 3(1)(i) is not proved by any angle. Conclusion - Since the act of the appellant has been found to be not deliberate therefore we observe that a mistake had occurred on the part of the appellant in revising the said Returns of the assessee. Thus it cannot be held that the appellant has aided or abetted the availing of extra irregular CENVAT Credit by the said assessee. No penalty is imposable on the appellant. Therefore the penalty of Rs.25, 00, 000/- imposed on the appellant under Rule 26(2) of the Central Excise Rules 2002 is set aside - Appeal allowed.
The core legal questions considered by the Appellate Tribunal (AT) in this case are:
1. Whether the appellant, a Superintendent of Central Excise, abetted or facilitated the assessee in availing and utilizing unavailable or irregular CENVAT Credit by revising ER-1 Returns beyond his mandate. 2. Whether the appellant's actions in revising ER-1 Returns constituted deliberate contravention of Rule 3(1)(i) of the Central Excise Rules, 2002, thereby justifying the imposition of a penalty under Rule 26(2) of the said Rules. 3. Whether the penalty of Rs. 25,00,000/- imposed on the appellant under Rule 26(2) is sustainable in light of the findings from disciplinary proceedings and the nature of the appellant's conduct. Issue-wise Detailed Analysis Issue 1: Allegation of Abetment and Facilitation in Availing Irregular CENVAT Credit Relevant Legal Framework and Precedents: Rule 26(2) of the Central Excise Rules, 2002 empowers the authority to impose penalty for contravention of the Rules. Rule 3(1)(i) mandates proper verification and adherence to prescribed documents and procedures for availing CENVAT Credit. Precedents establish that officials facilitating irregular credit knowingly or negligently may be liable for penalty. Court's Interpretation and Reasoning: The Tribunal noted the allegation that the appellant revised ER-1 Returns for the period August 2016 to November 2016, enabling the assessee to avail irregular CENVAT Credit amounting to Rs. 2,55,44,598/-. The adjudicating authority held that the appellant's scope was limited to correcting errors apparent on record and not to substantively alter data such as quantity or credit amounts. Revising the opening balance of September 2016 due to inability to revise August 2016 returns was viewed as exceeding the appellant's mandate. Key Evidence and Findings: The appellant's revision of the opening balance in September 2016 was considered a deliberate act facilitating excess credit. The adjudicating authority inferred collusion with the assessee's director, as this revision led to evasion of excise duty and passing on of excess credit to buyers. Application of Law to Facts: The unauthorized revision of returns beyond correcting apparent errors was seen as contravening Rule 3(1)(i), thus constituting facilitation of irregular credit. The penalty under Rule 26(2) was imposed on this basis. Treatment of Competing Arguments: The appellant contended that the revisions were made under bona fide belief in the correctness of the assessee's representation and without any extraneous consideration. The Tribunal took note of disciplinary proceedings which found no deliberate wrongdoing or contravention of Rule 3(1)(i). Conclusions: While the adjudicating authority initially found the appellant's actions to exceed his mandate and facilitate irregular credit, the Tribunal considered the bona fide nature of the appellant's conduct as established in disciplinary proceedings, weakening the allegation of deliberate abetment. Issue 2: Whether the Act of the Appellant Constituted Deliberate Contravention Justifying Penalty Relevant Legal Framework and Precedents: Penalty under Rule 26(2) requires proof of contravention of the Rules. Deliberate or intentional violation is a key factor in sustaining penalty. The principle that bona fide mistakes without extraneous motives do not attract penalty is well recognized. Court's Interpretation and Reasoning: The Tribunal relied heavily on the findings of the disciplinary authority which concluded that the appellant's acts and omissions were not deliberate but taken under bona fide belief in the correctness of the assessee's representation. There was no evidence of extraneous consideration or mala fide intent. Key Evidence and Findings: The disciplinary order explicitly stated: "acts and omissions on the part of the appellant were not deliberate, rather they were taken under bona fide belief that assessee's representation was correct. As there was no allegation of any extraneous consideration for such act or omission, the allegation of contravening of Rule 3(1)(i) is not proved by any angle." Application of Law to Facts: Given the absence of deliberate wrongdoing or mala fide intent, the Tribunal held that the appellant's mistake in revising returns was not sufficient to impose penalty under Rule 26(2). Treatment of Competing Arguments: The Revenue argued that the appellant's revision facilitated irregular credit and thus penalty was justified. The Tribunal balanced this against the disciplinary findings and the lack of deliberate contravention, favoring the appellant. Conclusions: The Tribunal concluded that the appellant's act was a bona fide mistake, not deliberate contravention, and therefore penalty was not imposable. Issue 3: Sustainability of Penalty Imposed Under Rule 26(2) Relevant Legal Framework and Precedents: Imposition of penalty under Rule 26(2) requires proof of contravention with culpable intent or negligence. Penalty is not sustainable if the act is found to be bona fide error without mala fide intent. Court's Interpretation and Reasoning: The Tribunal observed that since the act of the appellant was not deliberate and was taken under bona fide belief, the penalty imposed was not sustainable. The disciplinary authority's findings were given significant weight. Key Evidence and Findings: The disciplinary order and lack of evidence of extraneous consideration supported the conclusion that penalty was unwarranted. Application of Law to Facts: The Tribunal set aside the penalty of Rs. 25,00,000/- imposed under Rule 26(2) of the Central Excise Rules, 2002. Treatment of Competing Arguments: Despite Revenue's support for penalty, the Tribunal prioritized the bona fide nature of the appellant's conduct and absence of deliberate wrongdoing. Conclusions: The penalty was quashed and the appeal allowed with consequential relief. Significant Holdings "In view of the above position of law, I am of the view that acts and omissions on the part of the appellant were not deliberate, rather they were taken under bona fide belief that assessee's representation was correct. As there was no allegation of any extraneous consideration for such act or omission, the allegation of contravening of Rule 3(1)(i) is not proved by any angle." "Since the act of the appellant has been found to be not deliberate, therefore, we observe that a mistake had occurred on the part of the appellant in revising the said Returns of the assessee. Thus, it cannot be held that the appellant has aided or abetted the availing of extra irregular CENVAT Credit by the said assessee." "Hence, in the facts and circumstances of the case, no penalty is imposable on the appellant. Therefore, the penalty of Rs.25,00,000/- imposed on the appellant under Rule 26(2) of the Central Excise Rules, 2002, is set aside." Core principles established include:
Final determinations:
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