By TIOL News Service

CHANDIGARH, JULY 14, 2016: DURING the year 2002-03, the appellant purchased only invoices from the manufacturer without actually buying inputs.

The appellant took credit in books of account and issued invoices passing on credit. The object was to facilitate the manufacturer to take CENVAT credit.

The DGCEI issued a SCN dated 30.3.2006 to the appellant proposing imposition of penalty u/r 25 of the CER, 2002.

The adjudicating authority imposed a penalty equivalent to the amount of credit passed, i.e. Rs.7,26,885/-.

Appeal to the Tribunal did not bear any fruit. However, the High Court vide order dated 17.3.2011 remanded the matter to the Tribunal on the question of quantum of penalty.

The Tribunal dismissed the appeal and so the appellant is again before the High Court.

It is submitted that the appellant did not take CENVAT credit but only issued invoices on the basis of which the manufacturers took CENVAT credit; that the appellant had got enriched only to the extent of 1 to 3% of credit passed and, therefore, imposition of 100% of CENVAT credit passed, as penalty, was unreasonable and harsh. Moreover, the order did not satisfy the test of being a reasoned and speaking one, argued the appellant. The appellant also relied upon the decision in CEA No. 125 of 2010 (Commissioner of Central Excise, Chandigarh-I v. M/s Lalit Steel and Agro Industries) decided on 5.7.2010 wherein the High Court had upheld levy of 100% penalty on the assessee who had wrongly claimed the benefit of CENVAT credit and 10% in the cases of the assessee who had issued invoices to the main assessee.

The counsel for the revenue supported the order passed by the Tribunal.

The High Court after extracting the facts observed -

"9. A perusal of the impugned order shows that it has only been mentioned that in the cases in hand, undisputedly, the credit was sought to be passed on without invoices being accompanied by the goods. Further, it was noticed by the Tribunal that such an action is certainly a major violation of the provisions of law and being so, the question of exercise of any discretion in favour of the offender or showing any leniency to the offenders could not arise. This would not satisfy the test of being a speaking order which is a sine qua non for deciding the appeals. No legally justified reasons have been recorded by the Tribunal for dismissing the appeal of the assessee. The Tribunal being a final fact finding authority was required to deal with all aspects of facts and also law and then record its conclusions based thereon."

The matter was remanded.

(See 2016-TIOL-1374-HC-P&H-CX)