2008 (9) TMI 758 - AT - Central Excise

Summary

Issues:
1. Confiscation of cotton fabrics without accountal.
2. Clandestine clearance of grey fabrics without duty payment.
3. Determination of fine and penalty under Central Excise Act.

Issue 1: Confiscation of cotton fabrics without accountal
The Appellant, engaged in manufacturing cotton grey fabrics, was found to have kept a quantity of fabrics without proper accountal, leading to confiscation under Rule 25 of the Central Excise Rules, 2002. The lower authorities ordered confiscation with an option for redemption against payment of a fine. The Appellant argued that only goods cleared from the factory should be confiscated, not those found within the factory. However, Rule 25 states that any finished excisable goods kept without accountal in the factory are liable to confiscation. The confiscation of cotton fabrics by the lower authorities was upheld.

Issue 2: Clandestine clearance of grey fabrics without duty payment
The authorities also discovered that a quantity of grey fabrics had been clandestinely cleared without duty payment, leading to confiscation under Rule 25. A fine of Rs. 1.5 lakhs was imposed on the Appellant for this act. The Appellant contested the quantum of fine imposed, arguing that it was determined mechanically without proper consideration. The Tribunal reduced the fine to Rs. 1,00,000, emphasizing that the determination of fines should be based on sound judicial principles and not merely on collected security deposits.

Issue 3: Determination of fine and penalty under Central Excise Act
The Tribunal noted that the penalty equal to duty imposed under Section 11AC of the Central Excise Act for clandestine removal of excisable goods must be sustained. However, regarding the penalty imposed on the owner of the vehicle used for transportation, the Tribunal found it unjust as the owner, Shri K. Selvaraj, did not contribute to the misconduct. The penalty on Shri Selvaraj was set aside, emphasizing that penalties should be imposed on those directly responsible for the wrongdoing. The Tribunal also reduced the fine imposed on the vehicle from Rs. 40,000 to Rs. 20,000, aligning it with the principles of fair and just determination of penalties.

In conclusion, the Tribunal upheld the confiscation of cotton and grey fabrics, reduced the fines imposed on the Appellant, and set aside the penalty on the vehicle owner, emphasizing the need for penalties to be proportionate and based on individual culpability.