2008 (1) TMI 781 - AT - Central Excise

Summary

Issues:
1. Demand of duty on shortage and confiscation of excess goods.
2. Imposition of penalty under Section 11AC of Central Excise Act, 1944.
3. Confiscation of excess goods not entered in RG-I register.
4. Penalty for non-maintenance of records under Rule 10 of Central Excise Rules, 2002.

Issue 1: Demand of duty on shortage and confiscation of excess goods:
The case involved the appellants, engaged in manufacturing Emulsifiers, facing a stock verification revealing shortage and excess of finished goods and raw material. The Factory Manager admitted discrepancies, leading to a duty deposit of Rs. 2,02,270. A subsequent show cause notice proposed duty appropriation, confiscation of seized excess goods, and penalties. The adjudicating authority confirmed the duty demand, penalties under Section 11AC, and confiscation. The Commissioner (Appeals) modified the order, reducing penalties and setting aside the penalty on the factory manager. The Counsel contested the duty demand, confiscation, and penalties, citing absence of the dealing person affecting record maintenance. The Tribunal found shortage and excess goods, rejecting the argument of no clandestine removal and justifying the proposed duty appropriation.

Issue 2: Imposition of penalty under Section 11AC of Central Excise Act, 1944:
The Counsel argued against the penalty under Section 11AC, referencing a decision of the Hon'ble Madhya Pradesh High Court. The Revenue supported the penalties, emphasizing excess and shortage of goods and inadequate explanations from the appellant's representative. The Tribunal found no evidence of duty payment under protest and upheld the duty appropriation due to detected shortage. It concluded that the penalty under Section 11AC was not justified as there was no substantiated clandestine removal of goods.

Issue 3: Confiscation of excess goods not entered in RG-I register:
Regarding excess goods confiscation, the show cause notice alleged improper maintenance of Central Excise records under Rule 10 of Central Excise Rules, 2002. The Tribunal referenced a decision of the Hon'ble High Court of Madhya Pradesh and a Tribunal case, supporting confiscation due to non-entry in statutory records. It justified the confiscation of excess goods not recorded in the RG-I register. The Tribunal set aside the penalty under Section 11AC and imposed a reduced penalty under Rule 27 of the Central Excise Rules, along with reducing the redemption fine.

Issue 4: Penalty for non-maintenance of records under Rule 10 of Central Excise Rules, 2002:
The Tribunal addressed the penalty for non-maintenance of records under Rule 10 of Central Excise Rules, 2002. It set aside the penalty under Section 11AC and Rule 25, imposing a penalty under Rule 27 of the Rules and reducing the redemption fine. The decision was based on the appellant's failure to properly maintain records as required, leading to the imposition of a penalty under Rule 27 and a reduced redemption fine.

This comprehensive analysis of the judgment highlights the key issues addressed by the Appellate Tribunal CESTAT, New Delhi, providing a detailed insight into the legal reasoning and decisions made in the case.