No penalty under Rule 26 of Central Excise Rules, 2002 if goods were supplied with invoice

Atul Madhavji Parekh Vs C.C.E. & S.T. (CESTAT Ahmedabad)

Introduction: The case of Atul Madhavji Parekh vs. C.C.E. & S.T. (CESTAT Ahmedabad) revolves around penalties imposed under Rule 26 of Central Excise Rules, 2002. The charges relate to the abetment in the passing of fraudulent Cenvat Credit by M/s Shah Foils Ltd. to M/s Bluplast Industries Ltd. In this article, we delve into the CESTAT Ahmedabad’s decision that set aside the penalties and the grounds on which it was based.

Detailed Analysis: The charges against Atul Madhavji Parekh and Shri Ram Steels involved accusations of facilitating M/s Bluplast Industries Ltd. in obtaining fraudulent Cenvat Credit on invoices issued by M/s Shah Foils Ltd., allegedly without the supply of goods. Notably, a similar show cause notice was issued to M/s Shah Foils Ltd., making the same allegations. However, the case against M/s Shah Foils Ltd. was taken up by the tribunal and even reached the Hon’ble Supreme Court, resulting in a dismissal of the department’s appeal.

In the case of M/s Shah Foils Ltd., the tribunal concluded that the charges of issuing invoices without the actual clearance of goods were not sustainable. The tribunal observed that goods were indeed supplied along with invoices, and the allegations against M/s Shah Foils Ltd. were rejected. Given this precedent, the penalties imposed on Atul Madhavji Parekh and Shri Ram Steels were deemed unsustainable.

Conclusion: The CESTAT Ahmedabad, in its order dated 13.06.2022, has set aside the penalties imposed on Atul Madhavji Parekh and Shri Ram Steels. The decision relied on the precedent established in the case of M/s Shah Foils Ltd., where charges of issuing invoices without the actual clearance of goods were rejected. The tribunal found that the goods were supplied along with invoices, making the charges against the present appellants unsustainable. This case emphasizes the importance of consistent legal interpretation and precedent in determining the liability of individuals or entities in matters of taxation and excise regulations.

Please become a Premium member. If you are already a Premium member, login here to access the full content.