Penalty under Rule 26(1) Cenvat Credit Rules imposable when Abating on Fraudulent Availment of CENVAT Credit: CESTAT [Read Order]

While considering a bunch of appeals, the Ahmedabad Bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT)has held that the penalty under Rule 26(1) Cenvat Credit Rules is imposable when abating on fraudulent availment of CENVAT Credit.

Theappellants have challenged the imposition of penalty under Rule 26(1) of Central Excise Rules, 2002. The penalties were imposed on all the appellants except M/s. Rajguru Enterprises Pvt Ltd, for the charge, that they have purchased the inputs without the cover of invoice from M/s. Tarun Polymers, Daman and in respect of such materials M/s. Tarun Polymers, Daman has availed Cenvat credit of Rs. 2,91,70,642/- fraudulently. The penalty was imposed on the charge that M/s. Rajguru Enterprises Pvt Ltd have received bills without receipt of finished goods from M/s. Tarun Polymers, Daman. 

The appellants submitted that they have received the invoice but did not receive the goods. Further contended that since they have not handled the goods physically they are not liable for penalty under Rule 26(1) of Central Excise Rules, 2002. It was submitted that the goods are duty paid, hence the same is not liable for confiscation.

It was viewed that there is no dispute about the fraudulent availment of Cenvat Credit by M/s. Tarun Polymers, Daman, has wrongly availed the Cenvat Credit of the huge amount of 29170642/-. To avail of this fraudulent Cenvat credit by M/s. Tarun Polymers, Daman, all buyers of the goods purchasing the goods without the cover of invoice have facilitated M/s. Tarun Polymers, Daman for the wrong availment of CENVAT Credit.

A single-member bench comprising of Mr Ramesh Nair observed that it is a clear case of abatement in evasion of duty on the part of the appellants. From the investigations conducted, it was found that all were concerned in storing, receiving, and purchasing of the excisable/Cenvatable inputs which they knew and had reason to believe that such goods are liable for confiscation under the CenvatCredit Rules, 2004. The CESTAT held that since the appellants were concerned inthe omission/commission of all such acts, they are liable for imposition of penalty under Rule 26(1) of Central Excise Rules, 2002.

It was found by the CESTAT that all the appellants were indulged in abating M/s. Tarun Polymers, Daman for fraudulent availment of Cenvat credit therefore, they have made themselves liable for penalty under Rule 26(1) Cenvat credit rules 2002. The Tribunal upheld the impugned order imposing penalty under Rule 26(1) of Central Excise Rules.

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