Steel & Metals Co Vs C.C.E. & S.T. (CESTAT Ahmedabad)
Introduction: The case of Steel & Metals Co. vs. C.C.E. & S.T. (CESTAT Ahmedabad) revolves around alleged CENVAT invoicing violations. The appellant, Steel & Metals Co., is accused of playing a crucial role in the commission of offenses by M/s G.K. Founders. The charges include issuing CENVAT invoices without the actual delivery of goods, which were then shown as cleared to M/s G.K. Founders. The case raises questions about penalty imposition under Rule 26 of the Central Excise Rules, 2002.
Detailed Analysis: The key contention is whether the appellant, being aware of the non-existence of goods, is liable for confiscation. Rule 26 applies to individuals involved in transporting, removing, depositing, or dealing with excisable goods, knowing the potential confiscation consequences. The appellant’s active participation in facilitating the passage of incorrect CENVAT credit is a central concern. While the appellant argues against confiscation, their involvement in issuing invoices without actual goods delivery is considered a violation.
The case cites relevant precedents, including Ekta Enterprises, CCE Pune-I vs. Keetex, and Ballary Steel & Alloys Ltd., emphasizing that penalties under Rule 26 can be upheld even without goods confiscation. The argument that penalties cannot be imposed on companies is dismissed based on the Supreme Court’s ruling in Madhumilan Syntex Ltd. vs. Union of India, establishing corporate criminal liability.
For Shreeji Aluminium Pvt. Ltd. and Shri Paresh Babubhai Patel, the evidence suggests their active involvement in facilitating fraudulent CENVAT credit. The Gujarat High Court’s decision in Sanjay Vimalbhai Deora v. CESTAT supports the imposition of penalties even without proposed confiscation. The Punjab & Haryana High Court’s ruling in Vee Kay Enterprises v. CCE further reinforces the applicability of Rule 26.
As for M/s B.S. Roadways and Shri Saleem Saheb Patel, their roles as transporters involved in creating fictitious lorry receipts without actual goods delivery lead to the confirmation of penalties. However, the separate penalty on Shri Saleem Saheb Patel, the proprietor, is set aside, as the proprietary concern is not considered a distinct legal entity.
Conclusion: In conclusion, the CESTAT Ahmedabad upholds penalties on Steel & Metals Co., Shreeji Aluminium Pvt. Ltd., and M/s B.S. Roadways for their involvement in CENVAT invoicing violations. The ruling establishes that penalties under Rule 26 can be imposed without goods confiscation, emphasizing active participation in activities leading to potential confiscation. Shri Saleem Saheb Patel’s separate penalty is overturned, considering the proprietary concern as part of the proprietor’s legal entity.
As far as Appellant M/s Steel & Metal is concerned, I find that the said trading firm have played a crucial role in the commission of the offence by M/s G.K. Founders. Appellant were concerned with such cenvatable invoices wherein they shown the clearance of goods without delivery and were in the knowledge that such goods are liable to confiscation. Revenue has been able to prove that the appellants were engaged in the activity of issuance of invoices without movement of the goods. Further, a plain reading of Rule 26 indicates that imposition of the penalty therein is not tied to a condition that excisable goods have to be placed under confiscation under the Act/Rules. On the other hand, what the rule propounds is that a person who is involved either directly or indirectly, by way of possession, or transporting, removing, depositing etc. or in any other manner dealing with excisable goods and who has the knowledge that consequence of such said acts or omissions on his part could result in the impugned goods becoming liable for confiscation under the Act/Rules is then exposed to imposition of penalty under this rule. Only, the person implicated/concerned should have the knowledge of “possible confiscation” of the impugned goods. From the facts on record, the appellant have played crucial role in commission of offence by M/s G.K. Founder. I hold that Appellant is liable to penalty under Rule 26 of the Central Excise Rules.
FULL TEXT OF THE CESTAT AHMEDABAD ORDER
These appeals were filed by Steel & Metal Co., Shreeji Aluminium Pvt. Ltd., Paresh Babubhai Patel, B S Roadways and Saleem Saheb Patel against whom, the adjudicating authority imposed penalty underRule26of Central Excise Rules,2002. Since all these appeals challenge the same Order-in-Original 09/MP/VAPI/2011 dated 29.03.2011, they are taken for disposal by thiscommonorder.
2. The brief fact of the case is that an intelligence was collected by the officers of preventive Section of Vapi Commissionerate that M/s G.K. Founders Pvt. Ltd. are indulging in evasions of huge amount of Central Excise Duty by fraudulent availment of Cenvat Credit on the strength of Central Excise Invoices issued by M/s Shreeji Aluminium Pvt. Ltd. without physical receipts of the goods. They had procured fake lorry receipts without actual transportation of goods from one transporter i.e. M/s B.S. Patel Roadways. Therefore, simultaneous preventive checks/ searches were carried out on premises of M/s G.K. Founders Pvt. Ltd. transporters and other firms.After thorough investigation, a show cause notice dated 30.12.2009 was issued, proposing demand of Cenvat Credit along with penalty from M/s G.K. Founders Pvt. Ltd. and penalty under Rule 26 of Central Excise Rules 2002 on all the Appellants. By the order-in-original dated 29.03.2011, the Adjudicating authority confirmed the Cenvat demand along with interest and also imposed penalty. In addition, he also imposed penalty on Appellants under Rule 26 of Central Excise Rules, 2002. Aggrieved by the said order, appellants filed present appeals beforethis Tribunal.
3. Shri Paritosh Gupta and Shri Saurabh Rachchh, Learned Advocates appeared on behalf of Appellant M/s Shreeji Aluminium Pvt. Ltd and Shri Paresh Babubhai Patel submits that basic charges against the Appellantsare that they passed on Cenvat Credit on “non-existent‟ goods shown to have been cleared to M/s G.K. Founders Pvt. Ltd. where the charges are as regards non-existent goods, there is no question of any person dealing with the same, knowing that they are liable for confiscation, since the goods were not handled by the Appellant at all, which were shown to be cleared to the M/s G.K. Founders, as per the charges levelled in subject show cause notice itself. Accordingly, the Appellants cannot be held liable to any penalty under Rule 26 of the Central Excise Rules, 2002. He placed reliance on following decisions.
