2006 (2) TMI 484 - AT - Central Excise

Summary

Issues Involved:
1. Confiscation of goods not entered in RG1 register.
2. Alleged clandestine removal of goods and evasion of duty.
3. Non-compliance with statutory record maintenance under Rule 53 and Rule 173Q.
4. Interpretation of the expression "account for" under Rule 173Q.
5. Validity of penalties and fines imposed under Section 11AC read with Rule 173Q(1).

Issue-wise Detailed Analysis:

1. Confiscation of Goods Not Entered in RG1 Register:
The Tribunal addressed the confiscation of "G.P. Steel colour coated sheets" found in the factory but not recorded in the RG1 register. The appellants argued that the industry practice was to record production in the RG1 register only at the time of clearance. The Tribunal found that non-entry of goods in the RG1 register does not automatically lead to confiscation if the goods are still within the factory premises. The Tribunal relied on precedents, including Southern Steels Ltd. v. U.O.I. and Bhillai Conductors Pvt. Ltd., to conclude that mere non-entry does not invoke confiscation liability without intent to evade duty.

2. Alleged Clandestine Removal of Goods and Evasion of Duty:
The Commissioner initially confirmed a demand of Rs. 86,99,087/- for alleged clandestine removal of 1075.822 MT of colour-coated products and Rs. 36,89,419/- for removal of finished products as scrap. However, the Tribunal had set aside these demands, and the Supreme Court upheld this decision. The Tribunal reiterated that without evidence of intent to evade duty, the confiscation and penalties were unsustainable.

3. Non-Compliance with Statutory Record Maintenance under Rule 53 and Rule 173Q:
The show cause notice issued to the appellants cited contraventions of Rule 53 and Rule 173Q for failing to maintain statutory records and not entering goods in the RG1 register. The Tribunal noted that the Commissioner did not provide specific findings on the existence of an industry practice for recording production. The Tribunal emphasized that penal provisions must be strictly construed and that non-compliance with record maintenance alone does not justify confiscation without intent to evade duty.

4. Interpretation of the Expression "Account for" under Rule 173Q:
The appellants contended that "account for" should be interpreted as "explaining" or "being answerable for" rather than merely recording in the RG1 register. The Tribunal agreed, citing CCE v. Continental Chemicals and other cases, that the phrase "account for" means explaining the presence of goods rather than just recording them. The Tribunal found that the appellants had accounted for the seized goods through private production records and accounted-for raw materials, negating any intent to evade duty.

5. Validity of Penalties and Fines Imposed under Section 11AC read with Rule 173Q(1):
The Tribunal examined the penalties and fines imposed, noting that the Commissioner did not impose any penalty, indicating no intent to evade duty. The Tribunal referenced Amrit Foods v. Commissioner of Central Excise, where the Supreme Court held that specific clauses of Rule 173Q must be cited for penalties. The Tribunal concluded that the confiscation and fines were invalid without proving intent to evade duty, as required under Rule 173Q(1)(d).

Conclusion:
The Tribunal set aside the order of confiscation and the redemption fine, allowing the appeal. It emphasized the need for specific findings on industry practices and intent to evade duty, and the strict interpretation of penal provisions. The Tribunal's decision was pronounced in court, reaffirming the appellants' compliance with statutory requirements and the invalidity of the penalties imposed.