2008 (8) TMI 696 - AT - Central Excise

Summary

Issues:
1. Confiscation and penalty for non-duty paid unaccounted raw materials and finished goods.
2. Reduction of redemption fine and penalties.
3. Separate penalty on the partner.
4. Mens rea requirement for confiscation and penalty.

Analysis:
1. The case involved the discovery of excess non-duty paid unaccounted raw materials and finished goods valued at Rs. 2.4 crores. The original Adjudicating Authority imposed a redemption fine of Rs. 22 lakhs and penalties totaling Rs. 13 lakhs on the appellant firm, partner, and employee. The appellant sought reduction of penalties, arguing that the excess finished goods arose due to claimed conversion loss during job work production, and no Cenvat credit was taken on the raw materials.

2. The Tribunal considered the arguments and observations of the Commissioner (Appeals) regarding failure to account for goods in statutory records. It was noted that no duty was payable on the raw materials, and further reduction in redemption fine and penalties was warranted. The Tribunal acknowledged that 95% of the production was on a job work basis and decided to reduce the redemption fine to Rs. 10 lakhs and the penalties to Rs. 3 lakhs, setting aside penalties on the partner and employee.

3. The appellant contested the imposition of a separate penalty on the partner after a penalty was already levied on the firm. The Tribunal agreed that no penalty was warranted for the partner and the employee, considering the absence of mens rea for clandestine removal and the high value of copper, even in small quantities. Thus, penalties on the partner and employee were set aside, and a reduction in redemption fine and penalty on the firm was deemed appropriate.

4. The Revenue argued that no mens rea was required for confiscation and penalty, citing a precedent. However, the Tribunal considered the specific circumstances of the case, including the failure to maintain proper accounts and the nature of the production process, leading to the decision to reduce the redemption fine and penalties. The Tribunal emphasized the lack of mens rea for clandestine removal by the partner and employee, leading to the setting aside of penalties for them and the reduction of penalties for the firm.