Penalty under Rule 26(2) of the Central Excise Rules, 2002 cannot be imposed on a person who has neither issued an excise duty invoice without delivery of goods nor abetted the creation of documents used to claim ineligible CENVAT credit.

ORDER: [PER SHRI K. ANPAZHAKAN]

The present appeal has been filed by Shri Satyanaryan Dey (hereinafter referred to as the "appellant"), the proprietor of M/s. Shyam Sons India Ltd. against the penalty of Rs. 5 lakhs imposed on him under Rule 26 (2) of the Central Excise Rules, 2002.

The facts of the case are that the Revenue entertained the view that the appellant had availed CENVAT Credit without using the concerned pig iron in the factory. It is seen from the record that M/s. Maheshwary Ispat Ltd. had purchased pig iron from the supplier-manufacturer, namely, M/s. Neo Links Ltd. under the cover of Central Excise Invoices, on which CENVAT Credit was availed. Based on such duty-paying documents, the appellant has availed the impugned credit.

The Order-Original-No. 66/ADC/BOL/13 dated 8-10-2013 disallowed the said credit against the purchaser and imposed a penalty on both the manufacturer and its director. A penalty of Rs.5 lakhs has also been imposed on the appellant under Rule 26 (2) of the Central Excise Rule, 2002.

The submissions of the appellant are that: -

 Firstly, Shri Satyanaryan Dey, dealt with the Pig Iron that was admittedly central excise duty paid as well as VAT paid and thus was not liable for confiscation and has not been confiscated by the Id adjudicating authority.

 Secondly, Shri Satyanaryan Dey, as an unregistered dealer of goods, had no obligation under the Central Excise laws or procedures. He sold the goods under the cover of his Firm’s challans without passing on any central excise duty and thus his buyers also did not avail any cenvat credit.

 Thirdly, having dealt with the goods, which did not contravene any provisions of Central Excise laws or procedures, merely on the plea that the Purchasers had availed irregular credit, Shri Satyanaryan Dey who sold officially the goods under the cover of his Firm’s Challans cannot be visited with penalty under Rule 26 (2) of CER.

 As far as Rule 26 (2) of CER is concerned Shri Satyanarayan Dey did neither issue any central excise invoice, let alone without delivery of the goods, nor abetted in making any such invoice nor issued any other documents or abetted in making such documents on the basis of which the user of said invoice or document is likely to take or taken any ineligible benefits of credit or refund, so no penalty is also attracted under this provision.

 Since the goods in question are Central Excise duty paid and Shri Satyanarayan Dey has not facilitated his buyers to avail any Cenvat Credit illegally, there is no occasion for him to believe that the said Pig iron were liable for confiscation.

 As the purchaser, who had availed alleged purported ineligible credit is of the stature of a Public Limited Company and breached the provision of cenvat credit rules by availing credit without using the input in the manufacture, it should be considered wholly their culpability and obligation. Merely, because Shri Satyanaryan Dey sold the duty paid goods to the buyers, who uncontrovertibly did not avail cenvat credit, it cannot be said that Sri Dey has made himself liable to penalty under Rule 26 (2) of CER for abetting the the Purchaser in availing cenvat credit. There was no prohibition in law, as far as Shri Dey is concerned, to buy and sell duty paid Pig iron, so long as the buyers to whom he sold the goods did not avail any cenvat credit.

 It is respectfully submitted that the illegality, if there happened, if any at all, it started and ended with the purchaser, who had availed paper credit without using the goods in the manufacture of duty paid final product. The appellant, Shri Satyanarayan Dey, who received the goods from the broker, cannot be held liable for availing the illegal credit by the purchaser.

 Reliance is placed on the following precedent decisions:-

(i) Final Order No. 77582-77584/2024, dated 21-11-2024, Satyanarayan Dey & Ors. vs. Comm, CGST&CE, Bolpur;

(ii) Final Order No. 77198/2025, dated 05-08-2025, Satyanaraya