2004 (11) TMI 390 - AT - Central Excise

Summary

Issues:
1. Central Excise duty evasion and clandestine removal of finished goods.
2. Show Cause Notice for demand of Central Excise duty, penalty, and interest.
3. Jurisdiction of authorities and invocation of extended period of limitation.
4. Interpretation of when goods reach RG1 stage for marketing.
5. Consideration of reconciliation statement and payment of duty.
6. Imposition of penalty and interest when duty is paid before Show Cause Notice.

Issue 1: The case involves the evasion of Central Excise duty and clandestine removal of finished goods from the factory without proper accounting. A team of officers conducted anti-evasion checks and found discrepancies in the production records, leading to the initiation of proceedings against the manufacturer.

Issue 2: A Show Cause Notice was issued demanding Central Excise duty on shortages of finished goods, unaccounted products sent to the filling department, along with penalties and interest. The Joint Commissioner confirmed the demand and imposed penalties, which were partially modified by the Commissioner of Central Excise (Appeals).

Issue 3: The appellant challenged the jurisdiction of the authorities, arguing that the Show Cause Notice and Order-in-Original were contrary to the Board's instructions and that the demand beyond one year from the notice date was not maintainable without invoking the extended period of limitation.

Issue 4: The interpretation of when goods reach the RG1 stage for marketing was crucial. The appellant argued that drugs could only be entered in the RG1 register after being packed and labeled as per the provisions of the Drugs & Cosmetics Act, 1940, and the Central Excise Rules, 1944.

Issue 5: The reconciliation statement submitted by the appellant showing shortages and voluntary payment of duty was considered during the proceedings, leading to a reduction in the demand based on accepted shortages and duty payments.

Issue 6: The appellant relied on a precedent to argue against the imposition of penalty and interest when duty is paid before the issuance of a Show Cause Notice. The Tribunal found in favor of the appellant, setting aside the duty demand and penalties, emphasizing the legal requirements for entering drugs in the RG1 register.

In conclusion, the Tribunal allowed the appeal, highlighting errors in the imposition of duty demand and penalties, emphasizing the legal provisions governing the entry of drugs in the RG1 register and the timing of duty payments in relation to penalty and interest assessments.