2005 (12) TMI 333 - AT - Central Excise

Confiscation of the finished goods and raw material - Penalty - Non-accountal of finished goods - HELD THAT - In respect of the finished goods I find that the appellants have been continuously taking a plea before the lower authorities that these goods were not yet completely finished and goods still have to attain the RG-1 stage. The appellants have also been continuously taking a plea that there was no intention to remove the goods but it was an error on their part of not entering into the statutory record. This in my opinion may be correct, given the fact that the quantity of finished goods were not that very high. The show cause notice issued to the appellants in the present case that there is no allegation to remove the goods from the factory without payment of duty. In the absence of any such allegation in the show cause notice it cannot be considered or presume that the appellants had intention to remove the goods without payment of duty. In respect of raw material found in the appellants factory there is no allegation in the show cause notice that these goods were, in fact, produced or manufactured by the appellants. The goods which were found were granules which are used as inputs by the appellants for manufacturing planks, drums in their factory. Since these are inputs the question of their confiscation does not arise as held in the case of CCE, Indore v. Avanti LPG India Ltd. 2003 (12) TMI 147 - CESTAT, NEW DELHI . Thus, the confiscation of the finished goods and the raw material is not in connoscence with law and the same is set aside. Penalty imposed on the appellants under Rule 25 is also not warranted and the same is also set aside. But at the same time I find that the appellants have violated the provisions of Rule 10 of the Central Excise Rules, 2002 for which they are liable to be penalized under Rule 27. A penalty of Rs. 2000/- on the appellants under Rule 27 is imposed for violation of the Rules. Appeal is disposed of in above terms.

Summary

Issues:
Confiscation of finished goods and raw material, redemption fine, penalty imposition, intention to remove goods without payment of duty, violation of statutory records, Rule 25 violation, Rule 10 violation, penalty under Rule 27.

Confiscation of Finished Goods:
The appeal challenged the Order-in-Appeal upholding the confiscation of finished goods and raw material with an option for redemption on payment of fine and imposition of penalty. The officers found excess finished goods and raw material during a visit to the factory, leading to a show cause notice for confiscation and penalty. The appellants argued that the goods were still in process and not entered in records due to manufacturing dates. The Tribunal considered the intention to remove goods without duty payment, citing the absence of such allegations in the notice. Referring to precedent cases, the Tribunal found no grounds for confiscation of finished goods due to lack of evidence of intent.

Confiscation of Raw Material:
Regarding the raw material, the appellants contended that the excess granules were inputs stored due to issues at a sister concern. The Tribunal noted that the show cause notice did not allege production by the appellants, and since the granules were inputs, confiscation was deemed inappropriate. Citing a relevant case, the Tribunal held that the granules did not qualify as excisable goods, thus ruling out confiscation. The confiscation of raw material was set aside based on these findings.

Penalty Imposition:
While the confiscation of goods was overturned, a penalty under Rule 27 for violating Rule 10 of the Central Excise Rules, 2002 was imposed. The Tribunal found the appellants liable for this violation and imposed a penalty of Rs. 2000. However, the penalty under Rule 25 was deemed unwarranted and set aside. The judgment concluded by disposing of the appeal in accordance with the above decisions and penalties imposed.

In conclusion, the Tribunal ruled in favor of the appellants by setting aside the confiscation of finished goods and raw material, along with the associated penalties, except for a penalty under Rule 27 for violating Rule 10. The judgment emphasized the importance of evidence of intent to remove goods without duty payment and the distinction between finished goods and raw material in terms of excisability.