2009 (4) TMI 824 - AT - Central Excise

Summary

Issues:
1. Shortage and excess quantity of finished goods found during stock verification.
2. Confiscation of goods, imposition of redemption fine, demand of duty, and penalties imposed.
3. Discrepancy explained as clerical error, non-maintenance of proper accounts under Rule 10 of Central Excise Rules.
4. Justification of confiscation, penalty, and fine based on findings of authorities.
5. Reduction of redemption fine and penalty amounts.
6. Imposition of penalty on the commercial head of the factory.

Analysis:
Issue 1: The case involved a situation where a shortage of 82144 nos. and an excess of 73590 nos. of different varieties of wiring harness were discovered during a stock verification conducted by Central Excise Officers at the factory premises.

Issue 2: The original authority confiscated the excess goods, imposed a redemption fine of Rs. 2,50,000/-, confirmed a duty demand on the shortage, and levied penalties on the appellant-company and the Head (CFA) under Rule 26 of Central Excise Rules, 2002. Both appellants challenged these decisions by filing appeals.

Issue 3: The appellants contended that the discrepancy was due to a clerical error and argued that the multiple varieties of goods being manufactured made clerical mistakes possible. They emphasized that there was no intention of clandestine removal of goods and that the duty on the shortage was promptly paid to avoid legal issues. The non-maintenance of proper accounts under Rule 10 of the Central Excise Rules was highlighted in their defense.

Issue 4: The Revenue, represented by the Departmental Representative, supported the findings of the Commissioner (Appeals) regarding the confiscation, penalty, and fine. It was argued that the goods found in excess were unaccounted for, justifying the actions taken against the appellants.

Issue 5: The judge, after considering both sides and reviewing the records, agreed that the discrepancy was a result of non-maintenance of proper accounts and a contravention of Rule 10 of the Central Excise Rules. While upholding the confiscation of goods and imposition of penalty, the judge deemed the original amounts of fine and penalty as excessive and reduced them to Rs. 25,000/- and Rs. 5,000/- respectively.

Issue 6: In the case of the penalty imposed on the commercial head of the factory, the judge found insufficient evidence regarding his knowledge of the shortage of goods. Consequently, the penalty on the appellant No. 2 was set aside, and the appeal filed by appellant No. 2 was allowed with consequential relief.