2026-VIL-1781-CESTAT-KOL-CE
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CENTRAL EXCISE CESTAT Cases

Central Excise - Maintainability of penalty proceedings under Rule 26(2) of Central Excise Rules, 2002 against a Director of a company without issuing SCN to the company - Appellant, a Director but not the Authorised Signatory of a trading company, was penalised under Rule 26(2) for the company's alleged availment and passing on of CENVAT credit on paper transactions without receipt of goods - SCN was issued to the Appellant for penalty but not to the company - The adjudicating authority confirmed the penalty in the de novo order after the matter was remanded by the Tribunal - Appellant contended that the proceedings against him without issuing SCN to the company are not maintainable in law - Whether penalty can be imposed on the Director without issuing SCN to the company - HELD - It is an admitted fact that proceedings were initiated against the Appellant for imposition of penalty without any SCN to the company. The other Director was the Authorised Signatory of the company and the Appellant was not. Penalty cannot be imposed on the Director for the alleged offence of the company without making the company a party - The proceedings initiated against the Appellant without issuing notice to the company are legally not sustainable and the penalty is set aside - Imposition of penalty under Rule 26(2) of Central Excise Rules, 2002 for issue of invoices without supply of goods - Appellant, a Director of a trading company, was penalised for facilitating passing on of CENVAT credit to buyers on 57 consignments of M.S. items allegedly received only through invoices from a supplier found to have no infrastructure for manufacturing M.S. items - The Department relied on the supplier's lack of infrastructure and on the reversal of credit by the buyers - Appellant contended that he did not issue any invoice without supply of goods and that the supplier was a registered manufacturer from whom goods were procured through brokers - Whether penalty is imposable under Rule 26(2) in absence of a finding that the Appellant issued invoices without delivery of goods - HELD - Penalty under Rule 26(2) can be imposed only when a person is found to issue invoices without supply of the underlying goods or abets in making such invoices. There is no finding in the impugned order that the Appellant issued any invoice without supply of goods to facilitate others in taking CENVAT credit, and no evidence of connivance or abetment by him. The Director was not the beneficiary of the credit passed on. Reversal of credit by the buyers under compulsion has no impact on the Appellant's company and cannot be taken as an admission of passing on irregular credit. The supplier not having sufficient infrastructure cannot lead to an inference that the company did not receive the goods and passed on credit through paper only - The penalty imposed under Rule 26(2) is set aside - Evidentiary value of statements of truck owners where the procedure under Section 9D of the Central Excise Act, 1944 is not followed - The adjudicating authority relied on the statements of some truck owners to sustain the allegation of supply of invoices without goods - Appellant contended that the statements have no evidentiary value since the procedure under Section 9D was not followed - Whether the statements recorded during investigation can be relied upon without following Section 9D - HELD - Following the Hon'ble High Court at Punjab and Haryana, Section 9D(1) is mandatory. Unless the circumstances in clause (a) exist, the maker of the statement must first be examined as a witness before the adjudicating authority, who must then form the opinion that the statement should be admitted in evidence in the interests of justice. If this procedure is not followed, the Revenue is regarded as having given up the witnesses and the statements must be eschewed from consideration as not relevant for proving the truth of their contents - The statements of the truck owners have no evidentiary value and cannot be relied upon, and the penalty founded on them cannot be sustained.
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