Tax Evasion by misusing Performance Certificate: CESTAT upholds Penalty on CA under Rule 26 of Central Excise Rule [Read Order]

The Ahmedabad Bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) upheld the penalty imposed on Chartered Accountants (CA) under Rule 26 of Central Excise Rule, 2002 since the Certificate was misused for tax evasion.

The company M/s. Iqbal Synthetics Pvt. Ltd. has cleared the goods from their EOU clandestinely under the guise of removal of the goods against advance license without payment of duty. For advance license, the appellant, Vishal Jain who is a Chartered Accountant had issued a performance certificate to M/s. Thejavathu Chandrakala, M/s. Eastern Products, M/s. Devashree processors and M/s. Amba Expofab without verifying their credentials.

Based on that the DGFT had issued an advance license to the said parties which was subsequently, misutilized leading to the evasion of Government revenue to the tune of rupees more than Rs. 10 Crores of excise duty therefore, the appellant was imposed a penalty of Rs. 5 lacs under Rule 26 of Central Excise Rules, 2002. 

Shri R. Subramanya, Counsel appeared on behalf of the appellant submitted that the appellant has acted as a professional under bona fide belief. He submits that the appellant has charged nominal fees of Rs. 1500/- for the certificate and he was not aware of any misuse of the certificate and further submits that the appellant has not dealt with any goods which are liable for confiscation.

The appellant has admittedly issued false performance certificates to fraudulent parties who, based on the said certificates obtained the advance license and such advance licenses were used for evasion of huge excise duty on the clearance of goods clandestinely from the EOUs.

Without the performance certificate, the fraudulent advance license could not have been issued and huge revenue loss could not have occurred to the government exchequer. Therefore, for the entire offence, the appellant’s role is a key role. The appellant has also not verified any credentials of their so-called clients.

It is evident from the record that the appellant has categorically admitted in his statement that if he would have known that so huge revenue involvement is there, he could have charged a heavy amount of fees as compared to Rs.1500 per certificate. With this statement, the mala fide of the appellant is established.

A two-member bench comprising Mr Ramesh Nair and Mr C L Mahar observed that the Appellant had issued false certificates without verifying any records, which is apparent from his statement which is annexed at Exhibit D to the petition. Based on the said false certificates the advance licenses were issued and on that basis, the imports were allowed. Later, when it was discovered that the licenses were issued based on these false certificates, the Commissioner of Customs imposed the penalty.

It was held that “the appellant being a qualified Chartered Accountant, could not have issued such false certificates which resulted in the issuance of advance licences for‟ import and thereafter take up a plea that he was ignorant of the facts.”

While dismissing the appeal, the CESTAT upheld the impugned order to the extent of the penalty of Rs. 5 lakhs which was imposed upon the appellant under Rule 26.

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