2006 (11) TMI 448 - AT - Central Excise

Summary

Issues involved: Appeal against order-in-appeal upholding confiscation and penalty on appellant.

Facts: Appellant, a 100% E.O.U., had excess 'Polywool Yarn' seized by Central Excise officers. Show cause notice issued for confiscation and penalty. Adjudicating authority ordered confiscation under Section 111(o) of Customs Act and imposed penalty. Commissioner (Appeals) upheld confiscation but reduced penalty.

Appellant's Submission: Confiscation under Section 111(o) not applicable as no violation of exemption notification conditions. Penalty under Rule 173Q and 226 not applicable as functioning under Rule 100B of Central Excise Rules. Appellant under constant Customs officer supervision, no unauthorized material movement. Provided reconciliation of inputs received and consumed.

Department's Submission: Appellant failed to maintain proper accounts, should explain. Section 111(o) applies, confiscation justified. Penalty imposed correctly under Rule 173Q and 226 due to lack of proper accounts.

Judgment: Issue is whether Section 111(o) of Customs Act applies for confiscation. Confiscation can only be ordered if conditions of exemption notification violated. No findings of such violation in this case, confiscation based on stock variation. Confiscation requires violation of exemption conditions, not just any law violation. Principle of 'ejusdem generis' applies. Previous decisions support that confiscation only in case of exemption violation. Confiscation set aside, penalty also set aside. Appeal allowed with consequential relief.