COMMISSIONER OF CENTRAL EXCISE Vs. MINI STEEL TRADERS

JUDGEMENT

(1.) THIS order shall dispose of Central Excise Appeal Nos. 72 to 79 and 87 of 2011 as learned counsel for the parties are agreed that common question of law is involved in all the appeals. However, the facts are being extracted from CEA No. 72 of 2011, (2011 (264) E.L.T. 535 (Tribunal)). CEA No. 72 of 2011 has been preferred by the revenue under Section 35G of the Central Excise Act, 1944 (in short, "the Act") against the order dated 16 -11 -2010, Annexure A. 4 passed by the Customs, Excise and Service Tax Appellate Tribunal, New Delhi, (in short, "the Tribunal") in Central Excise Appeal No. E/207/2009 -SM(BR), claiming following substantial question of law: -

(2.) A few facts relevant for the decision of the controversy involved, as narrated in CEA No. 72 of 2011 may be noticed. On 30 -6 -2002, the staff of Central Excise Division, Mandi Gobindgarh visited the factory premises of M/s. A.R. Alloys, Nasrauli Road, Mandi Gobindgarh. No stock of duty paid scrap was found against recorded balance. A partner of the firm stated that since April, 2002, they had taken Cenvat credit on invoices issued by M/s. Minni Steel Traders without receiving any material with the invoices. The proprietors of Minni Steel and Minni Ispat, Mandi Gobindgarh admitted having issued invoices to A.R. Alloys without supplying any material. During further investigation, Mr. Anil Kumar Singla, proprietor of M/s. I.S. Steel and Agro Industries, Mandi Gobindgarh admitted having issued invoices to Minni Ispat without supplying the material. He also admitted that he had closed down his manufacturing activity in March, 2002 and that inputs purchased from manufacturers were sold in the market but their receipt was shown in the records and Cenvat credit was availed thereon. To square up the accounts, he had shown production in his records. He also stated that except in some cases, he had issued invoices only without supplying the material and in some cases he had supplied material purchased from local market along with his own invoices. He further admitted having taken Cenvat credit of Rs. 10,14,979.60 on the inputs without undertaking any manufacturing activity and further passed Cenvat credit of Rs. 7,85,403/ - by issuing sale invoices of melting scrap. Show cause notice dated 26 -2 -2007, Annexure A. 1 was issued to the respondent. The case was adjudicated and the adjudicating authority confirmed the demand of duty from the manufacturer of final products and imposed varying penalties upon the manufacturers and dealers vide order dated 29 -2 -2008, Annexure A. 2 Aggrieved by the order, all the parties filed appeals before the Commissioner (Appeals). Vide order dated 31 -10 -2008, Annexure A. 3, the Commissioner (Appeals) dismissed the appeals of the manufacturers of final products challenging the demand of duty and penalties imposed but allowed the appeals of the respondent -assessees and set aside the penalties imposed. Feeling aggrieved, the revenue filed appeals before the Tribunal. Vide order dated 16 -11 -2010, Annexure A. 4, the Tribunal dismissed the appeals on the ground that where a person merely arranges modvatable document to the manufacturer without actual delivery of goods, penalty could not be imposed under Rule 209A of the Rules. Hence the instant appeals by the revenue.

(3.) ON the other hand, learned counsel for the respondent -assessees in all the cases, besides supporting the impugned orders passed by the Commissioner (Appeals) and the Tribunal, relied upon judgment of this Court in CEA No. 56 of 2009 Commissioner of Central Excise Commissionerate, Chandigarh v. Shri Ashish Gupta, decided on 18 -2 -2010 to contend that the Commissioner (Appeals) and the Tribunal had rightly deleted the penalty. It was urged that the provision of sub -rule (2) to Rule 26 of the Central Excise Rules, 2002 (in short, "the Rules") was inserted w.e.f. 1 -3 -2007 vide Notification No. , dated 1 -3 -2007 and, thus, it could not be made applicable to the proceedings prior thereto. Judgment in Vee Kay Enterprises's cases (supra) was sought to be distinguished by urging that though this Court had held in favour of the assessee regarding non -applicability of Rule 26(2) of the Rules prior to 1 -3 -2007, the issue therein was whether Rule 25(1)(b) and 25(1)(d) of the Rules were applicable or not. It was argued that in the light of the findings recorded by the Commissioner (Appeals) that the present case was not covered under Rule 25(1)(b) of the Rules, the revenue cannot derive any benefit from the said pronouncement.