Goodluck Empire Vs CCE & ST (CESTAT Ahmedabad)
The case of Goodluck Empire Vs CCE & ST, adjudicated by CESTAT Ahmedabad, revolves around penalties imposed under Rule 26 of the Central Excise Rules, 2002. The appellants were charged for issuing Cenvat Credit invoices to M/s Nakoda Alloys Pvt. Ltd. without supplying goods, resulting in the fraudulent passing of Cenvat credit.
Analysis: The appellants, represented by their Chartered Accountant, argued that the Adjudicating Authority did not conduct proper cross-examination, and thus, their statements couldn’t be used as evidence for the penalty imposition. They also argued that Rule 26(2), under which penalties were imposed, only came into effect from April 1, 2007, meaning it could not apply to transactions before that date.
Rule 26(2), under which penalties were imposed, only came into effect from April 1, 2007, meaning it could not apply to transactions before that date.
Upon examination, the Tribunal noted that the main party in question, M/s Nakoda Alloys Pvt. Ltd., had their case settled under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019. The Tribunal also acknowledged that cross-examination had been conducted despite claims of discrepancies.
Nevertheless, the Tribunal agreed that Rule 26(2) cannot be applied retrospectively and is only applicable for transactions after April 1, 2007. Accordingly, the Tribunal absolved M/s Jenil Empire of any penalty, as their transactions occurred prior to this date. For M/s Goodluck Empire, however, penalties applied only for transactions post-April 1, 2007, resulting in a reduction of the penalty from Rs. 8,20,000/- to Rs. 2,00,000/-.
Conclusion: The CESTAT Ahmedabad ruling in the Goodluck Empire Vs CCE & ST case clarifies the application of Rule 26(2) of the Central Excise Rules, 2002, in situations involving fraudulent Cenvat Credit transactions. This ruling underlines the importance of the effective date of legislation and the non-retroactive nature of laws. It also highlights the complexities in handling cases of fraudulent passing of Cenvat credit and the need for careful cross-examination in such cases.
FULL TEXT OF THE CESTAT AHMEDABAD ORDER
In this appeals penalty under Rule 26 of Central Excise Rules, 2002 was imposed for a charged of issuing Cenvat Credit invoices in favour of M\s Nakoda Alloya Pvt. Ltd. Without supplying the goods for fraudulent passing of Cenvat credit.
2. Shri, Sarju Mehta, Learned Chartered Accountant, appearing for the appellant submits that no proper cross examination was conducted by the Adjudicating Authority, therefore, the statements given by the appellants cannot be taken as evidence and in these cases for imposition of penalty only statements were relied upon. As regard main case of M\s Nakoda Alloys Pvt. Ltd. the said company got their case settled under Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 and this Tribunal vide order No. A/12309/2021 dated 01.02.2021 disposed of the appeal as withdrawn in terms of Section 127(6) of Chapter V of Finance (No. 2) Act, 2019.
2.1 He further submits that the penalty was imposed under Rule 26(2) of Central Excise Rules, 2002 whereas this Rule came into force only from 01- 04-2007. Therefore, for the transaction pertains to the period prior to 01.04.2007 no penalty can be imposed. He placed reliance on the following judgments:
