2009 (4) TMI 575 - AT - Central Excise

Confiscation and penalty - Cenvat/Modvat - Imposition of penalty - Held that - a part of raw material received by the appellants under various bills of entry were stored at the adjacent premises belonging to M/s. N.K. Polymers. Admittedly such raw material was of no use to M/s. N.K. Ploymers or M/s. A.P.I. Industrial Corporation. All the three units are located in one compound. The security guard of the whole compound at the gate is also one. A part of raw material was stored in the premises of other unit was on account of the place constraint. No mala fide stands attributed to the appellant. In fact no duty demand stands raised against them in respect of the said goods. As such I find no justification in confiscation of raw material admittedly stored in the premises of the adjacent factory which is situated in the same compound. The same is accordingly set aside. Penalty - Held that - admittedly there has been technical and procedural breach of law by the said appellant though without any mala fide intention. I find that provisions of sub Rule 25(1)(d) which provides for imposition of penalty for contravention the Rules with intent to evade duty are not applicable. Such contravention would be covered under the provisions of Rule 27. As there is breach of law on the part of appellant some penalty is required to be imposed upon them. I reduce the penalty on M/s. Sanchit Polymers to 5, 000/- (Rupees five thousand only) in terms of rule 27 - As regards penalties imposed on other appellants M/s. N.K. Polymers in the premises of which factory the raw material was stocked I do not find any role played by them so as to invite any penal action against them. Similarly penalty imposed upon Shri Ghanshyam Das Goel is also not called for. Appeal allowed - decided partly in favor of appellant.

Summary

Issues:
1. Confiscation of raw materials stored outside factory premises.
2. Imposition of penalties on the appellants.
3. Role of adjacent premises in storing raw materials.
4. Applicability of Central Excise Rules and Board Circular.

Analysis:
1. The judgment revolves around the confiscation of raw materials stored outside the factory premises by M/s. Sanchit Polymers. The officers found that part of the raw materials, for which the appellants had taken credit, was stored outside the factory premises. The Original Adjudicating Authority confiscated the raw materials with a redemption fine and imposed penalties. The Commissioner (Appeals) later reduced the redemption fine and penalties, leading to the appeal before the Tribunal.

2. The imposition of penalties on the appellants was challenged on the grounds that no duty demand was made. The appellant argued that the penalties and confiscation were unwarranted, citing procedural difficulties due to space constraints. The Tribunal considered the Larger Bench decision in the case of M/s. Godrej Soaps and other decisions. The learned Advocate contended that the breach was procedural and technical, not justifying such high penalties or confiscation.

3. The judgment also delves into the role of the adjacent premises, belonging to M/s. N.K. Polymers, in storing the raw materials. The Tribunal noted that the raw materials stored in the adjacent premises were of no use to M/s. N.K. Polymers or another unit. The proximity of the units in the same compound, sharing a security guard, was highlighted. The Tribunal found no mala fide intent and set aside the confiscation of raw materials stored in the adjacent factory premises.

4. The applicability of Central Excise Rules and a Board Circular was discussed regarding the procedure for moving goods out of licensed premises. The Department justified the imposition of redemption fine and penalties for not following the prescribed procedure. The Tribunal acknowledged the technical and procedural breach of law by the appellants but reduced the penalty on M/s. Sanchit Polymers under Rule 27, as the provisions of Rule 25(1)(d) did not apply. Penalties imposed on M/s. N.K. Polymers and an individual were set aside due to lack of involvement warranting penal action.

This comprehensive analysis highlights the key issues addressed in the judgment, providing a detailed overview of the Tribunal's decision on each aspect of the case.