The Delhi Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that penalty under Rule 15A of CENVAT Credit Rules, 2004 (CCR) does not apply to the director or general manager.
The bench of Justice Dilip Gupta (President) and P. V. Subba Rao (Technical Member) has observed that Rule 15A of CCR, provides for penalty for violations of CCR not elsewhere specified. The CCR provide for availment of CENVAT credit by an assessee subject to some conditions and after following certain procedures. If there are violations of CCR, they can be violations by the assessee. There cannot be violations by the Director/ General Manager or any other functionary of the assessee because CCR do not place any obligation on these functionaries nor can these functionaries take any CENVAT credit.
These two appeals assail the order-in-appeal dated 15.02.20231 passed by the Commissioner (Appeals) Central Excise and CGST, Jodhpur upholding the Order passed by the Additional Commissioner and rejecting the appeals filed by Prem Jain andGyan Jain along with the appeal filed by M/s Prem Jain Ispat Limited, Kota.
The facts which led to the issue of the order are that the M/s Prem Jain Ispat Udyog Pvt Ltd., Kota is engaged in manufacture MS billets and bars falling under Chapter 72 of the Schedule to the Central Excise Tariff Act, 1985. It pays central excise duty and also avails CENVAT credit on the inputs and input service received by it.
A show cause notice was issued to the assessee seeking to deny CENVAT credit which it had availed on the strength of dealers invoices issued by M/s Ridhi Sidhi Enterprises, Jaipur (Raj.) during the period November 2016 to May 2017 without allegedly receiving any inputs.
Therefore, it was proposed in the SCN to deny this credit to the assessee and recover it under Rule 14 of CENVAT Credit Rules, 2004 read with Section 11A (4) of the Central Excise Act, 1944 along with interest under Section 11AA. I
t was also proposed to impose a penalty on the assessee under Rule 15 (ii) of CCR read with section 11AC of the Act. The SCN also proposed to impose penalties on Shri Prem Jain and Shri Gyan Jain.
All the noticees resisted the proposals in the SCN which were, however, confirmed by the Additional Commissioner in his OIO which order was upheld by the Commissioner (Appeals) in the impugned order.
The department imposed the penalty of Rs. 5,00,000 upon SH. Prem Jain Director of M/s Prem Jain Ispat Udyog Pvt Ltd. under rule 15A of the Cenvat Credit Rules, 2004 and Rule 26(2) of the Central Excise Rules 2002.
The department also imposed the penalty of Rs.5,00,000 upon Sh. Gyan Chand Jain Manager cum Authorised Signatory of M/s Prem Jain Ispat Udyog Pvt Ltd. under rule 15A of the Cenvat Credit Rules, 2004 and Rule 26(2) of the Central Excise Rules, 2002.
Rule 26(2) of the Central Excise Rules provides for imposing penalty on any person who either issues an excise duty invoice without delivery of goods specified therein or abets in making any such an invoice or any other document or abets in making any such document on the basis of which a user of the invoice or the document is likely to take or has taken ineligible benefit under the Act or Rules. In this case, the allegation in the SCN as well as affirmation in the impugned order is that the assessee had taken CENVAT credit on the strength of fraudulent invoices issued by M/s Ridhi Sidhi without supplying of the goods.
Rule 15A of CCR, provides for penalty for violations of CCR not elsewhere specified. The CCR provide for availment of CENVAT credit by an assessee subject to some conditions and after following certain procedures. If there are violations of CCR, they can be violations by the assessee.
There cannot be violations by the Director/ General Manager or any other functionary of the assessee because CCR do not place any obligation on these functionaries nor can these functionaries take any CENVAT credit. There is also no provision for imposing penalty upon the Director or the General Manager or other functionary of assessee under the CCR. Rule 15A of CCR, therefore, also does not apply to the Director or General Manager of the assessee.
The tribunal held that neither Rule 26 (2) of Central Excise Rules, 2002 nor Rule 15A of CCR under which the penalty was imposed on Shri Prem Jain and Shri Gyan Jain apply to the facts of this case. The penalty imposed on them cannot be sustained as it is imposed without any authority of law.
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Case Details
Case Title: Sh. Prem Jain Versus Commissioner Of Cgst & Central Excise-Udaipur
Case No.: Excise Appeal No. 55138 Of 2023
Date: 29/11/2024
Counsel For Appellant: None
Counsel For Respondent: Rakesh Agarwal
