2010 (2) TMI 672 - HC - Central Excise

Duty evasion - Rule 173Q - Confiscation - It is not disputed that there was shortage in inputs as well as excess of finished goods - Assessee by its own volition reversed the input credit excise duty to the tune of Rs. 29,780.22 - n the present case, admittedly finished goods were found in excess of the quantity mentioned in the books - It was not the case where the registers were not updated merely because of clerical or any other reasonable explanation - Decided against the assessee

Summary

Issues:
Factory inspection findings - Shortage of inputs and excess finished goods, Imposition of redemption fine and penalty, Interpretation of Rule 173Q, Violation of Rule 173Q(1)(b), Intention to evade excise duty.

Analysis:
The case involves the inspection of a factory by the Central Excise Department, revealing a shortage of inputs and excess finished goods. The Department issued a notice for confiscation and penalty. The adjudicating officer imposed a redemption fine and penalty under Rule 173Q of the Central Excise Rules. The Assessee appealed to the Tribunal, which reduced the fine and penalty. The High Court directed the Tribunal to consider specific questions related to the intention to evade excise duty and the excess stock of finished goods.

The High Court observed that the Assessee voluntarily reversed input credit excise duty for the shortage of inputs. The remaining dispute centered around the redemption fine and penalty for the excess finished goods. Rule 173Q allows for confiscation and penalty based on specified conditions, including the failure to maintain accounts for excisable goods. In this case, the excess finished goods violated Rule 173Q(1)(b), justifying the penalty and fine imposition.

While excess goods alone may not indicate an intention to evade duty, the Tribunal considered additional factors such as input shortage and the nature of excess finished goods not being from a single day's production. The Court agreed with the Tribunal's assessment that these factors, coupled with the violation of Rule 173Q(1)(b), supported the penalty and fine imposition. The Court concluded that there was no illegality in the findings, deciding in favor of the Department.

The Court's decision upheld the penalty and fine, emphasizing the violation of Rule 173Q(1)(b) due to the excess finished goods. The judgment highlights the importance of maintaining accurate records and complying with excise rules to avoid penalties and confiscation. The Assessee's actions, despite reversing input credit, did not absolve them from the consequences of violating excise regulations. The case serves as a reminder of the strict enforcement of excise laws and the consequences of non-compliance.