2002 (8) TMI 743 - AT - Central Excise

Issues Involved:
1. Confiscation of 12,200 Kgs of Rubber Compound Sheets.
2. Confiscation of raw materials valued at Rs. 1,21,260/-.
3. Confiscation of 68,345 Rubber Rings.
4. Imposition of penalties under Rules 173Q, 209, and 226.
5. Enforcement of the Bond and appropriation of the Bank Guarantee.
6. Differential Central Excise Duty of Rs. 10,34,619/- alleged to have been short-paid by DE.
7. Penalty under Rules 9(2) and 173Q on DE.

Detailed Analysis:

1. Confiscation of 12,200 Kgs of Rubber Compound Sheets:
- Contentions by DIPPL: The unit was established in 1989 and registered with the Central Excise Department in 1992. They claimed that they never crossed the basic exemption limit and that the non-accountal of the Rubber Compound Sheets in RG 1 register was not an offence. The goods were meant for export and were assessable at Nil rate of duty.
- Commissioner's Findings: The Commissioner rejected the plea of not maintaining an RG-1 register since DIPPL had obtained a Registration Certificate and was maintaining RG-1. The Commissioner concluded that the goods were liable for confiscation under Rule 173Q(1)(a) and Rule 226.
- Tribunal's Decision: The Tribunal found that DIPPL, being a declarant unit, was not required to maintain statutory records. The goods were assessable at Nil rate of duty and were meant for export. Therefore, the liability for confiscation under Rule 173Q read with Rule 226 was set aside.

2. Confiscation of Raw Materials Valued at Rs. 1,21,260/-:
- Contentions by DIPPL: The raw materials were issued for production but not utilized, and some quantity was still lying on the shop floor. The Stearic Acid purchased was not entered in the Stock Register as the entries were yet to be made.
- Commissioner's Findings: The Commissioner found the raw materials issued 2-8 months prior to the visit of the officers and accepted the explanations offered. However, 100 Kgs of Stearic Acid were held liable for confiscation under Rule 226.
- Tribunal's Decision: The Tribunal found that DIPPL, being a declarant unit, was not required to maintain records in the prescribed new material proforma under Rule 226. Therefore, the liability for confiscation was set aside.

3. Confiscation of 68,345 Rubber Rings:
- Contentions by DIPPL: They maintained that the quantity was available at the time of the officer's visit and was properly entered in the RG 1 register. They also explained the markings on the rings and the use of second-hand gunny bags.
- Commissioner's Findings: The Commissioner concluded that there was no evidence to show that the goods were actually manufactured at DE and transported to DIPPL. The benefit of doubt was granted to DE.
- Tribunal's Decision: The Tribunal upheld the Commissioner's findings and concluded that the duty liability was not made out. The order of confiscation and penalty was set aside.

4. Imposition of Penalties under Rules 173Q, 209, and 226:
- Commissioner's Findings: The Commissioner imposed penalties on DIPPL under Rules 173Q(1)(b) and 226 for non-accountal of rubber sheets and Stearic Acid. The proceedings against other individuals were dropped.
- Tribunal's Decision: The Tribunal set aside the penalties imposed on DIPPL, finding no liability under Rules 173Q and 226.

5. Enforcement of the Bond and Appropriation of the Bank Guarantee:
- Commissioner's Findings: The Commissioner ordered the enforcement of the Bond and appropriation of the Bank Guarantee to realize the amount of Rs. 50,000/- and Rs. 500/- for the rubber sheets and Stearic Acid, respectively.
- Tribunal's Decision: The Tribunal set aside the order for enforcement of the Bond and appropriation of the Bank Guarantee.

6. Differential Central Excise Duty of Rs. 10,34,619/- Alleged to Have Been Short-Paid by DE:
- Contentions by DE: DE contended that there was no suppression as the goods were sold and removed under proper excise gate pass, Delivery Challans, and Invoices. They also claimed that the goods were sold as scrap.
- Commissioner's Findings: The Commissioner found the sales to be from old stock and considered the possibility of the sale being made as scrap. The Commissioner granted the benefit of doubt to DE.
- Tribunal's Decision: The Tribunal upheld the Commissioner's findings, concluding that the lacunae in investigation could not be filled by interpretation or arguments. The duty liability was not made out.

7. Penalty under Rules 9(2) and 173Q on DE:
- Commissioner's Findings: The Commissioner did not find a case for recovery of Central Excise Duty on 68,345 Rubber Rings and other disputed goods found, and they were not liable for confiscation.
- Tribunal's Decision: The Tribunal upheld the Commissioner's findings and set aside the penalties imposed on DE.

Conclusion:
The Tribunal allowed the appeal filed by DIPPL and dismissed the appeals filed by the Revenue. The orders of confiscation and penalties were set aside, and no duty liability was made out against DE.

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