CESTAT clears Retrospective Penalties in CENVAT Credit Case [Read Order]
The Tribunal cited the Bombay High Court ruling in Ramesh Kumar Rajendra Kumar & Co. and reaffirmed the settled principle that penal laws cannot operate retrospectively unless explicitly stated
![CESTAT clears Retrospective Penalties in CENVAT Credit Case [Read Order]](https://images.taxscan.in/h-upload/2025/07/31/2071357-cenvat-credit-manufacturing-unit-business-expenditure-itat-taxscan-1.webp "CESTAT clears Retrospective Penalties in CENVAT Credit Case [Read Order]")
The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Allahabad Bench, has quashed retrospective penalties imposed under Rule 26(2) and Rule 25 of the Central Excise Rules, 2002. The decision pertains to a high-profile case involving denial of CENVAT credit allegedly availed on the basis of invoices without actual receipt of goods. The appeal arose from an earlier order...
The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Allahabad Bench, has quashed retrospective penalties imposed under Rule 26(2) and Rule 25 of the Central Excise Rules, 2002. The decision pertains to a high-profile case involving denial of CENVAT credit allegedly availed on the basis of invoices without actual receipt of goods.
The appeal arose from an earlier order by the Commissioner, CGST Noida, who had imposed penalties totalling over ₹1 crore on M/s YP Audiovisual Pvt. Ltd., its directors, and several associated entities and individuals. The penalties were levied on grounds that the appellants had issued or abetted in issuing invoices that facilitated wrongful CENVAT credit to M/s Accurate Meters Ltd., the main noticee in the case.
The dispute stemmed from credit availed during 2001-02 to 2003-04. However, the penalties were imposed invoking Rule 26(2), a provision inserted only from 1 March 2007. The appellants challenged the retrospective application of this rule, arguing that penal provisions cannot be applied to actions preceding their enactment.
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In its detailed ruling, the CESTAT bench, comprising Mr. P.K. Choudhary (Judicial Member) and Mr. Sanjiv Srivastava (Technical Member), agreed with the appellants' contention. The Tribunal observed that Rule 26(2), introduced in 2007, could not be applied retrospectively to acts committed during 2001-04.
Additionally, the CESTAT held that Rule 25 was wrongly invoked, as there was no evidence that the appellants handled or dealt with goods liable for confiscation — a necessary precondition for invoking the rule. The Tribunal pointed out that the appellants’ alleged involvement was limited to documentation, not physical goods.
The Tribunal also dismissed the revenue’s reliance on alleged admissions or settlements by the main noticee, noting that such aspects could not justify penal action against co-noticees without a legal basis.
The appeals were thus allowed, and all penalties against the appellants were set aside.
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