2010 (9) TMI 604 - AT - Central Excise

Search and seizure - Confiscation - Demand - Cenvat credit - Rule 25(1)(b) of the Central Excise Rules, 2002 - It is not in dispute that the respondent company has cleared several consignments during the months of January, February and March, 2004 - it is a clear case of non-maintenance of record of receipt and disposal of cenvat input, non-maintenance of records production and clearance of final products, clearance of excisable goods without payment of duty for three months - Since confiscation has been upheld, and the Commissioner (Appeals) has used his discretion to reduce the redemption fine, there is no need to interfere with this part of the order Regarding penalty - The involvement of the Directors with knowledge and intention is clearly evident - it is seen that penalties imposed by the original authority on the directors is nominal - penalty of Rs. 8,15,375/- imposed is restored -

Summary

Issues:
- Non-maintenance of statutory records
- Confiscation and redemption fine of water storage tanks
- Demand of duty and interest
- Imposition of penalties under Section 11AC
- Appeal against penalties on Directors

Non-maintenance of statutory records:
The case involved the failure of the respondent company to maintain essential statutory records related to the receipt and issue of cenvatable inputs, as well as production and clearance of final products for several months. This non-compliance was established through a visit by officers to the factory premises. Despite the issuance of invoices for certain clearances, the company's failure to maintain production and clearance records was a clear violation of Rule 25(1)(b) of the Central Excise Rules, 2002. The company also did not maintain records of cenvat credit inputs, with discrepancies in RG 23 Part I and Part II registers. The Commissioner (Appeals) erred in considering this as a case of delayed payment rather than non-accountal of inputs and clearances, leading to the application of Section 11AC of the Central Excise Act, 1944.

Confiscation and redemption fine of water storage tanks:
The original authority ordered the confiscation of 200 unaccounted water storage tanks, valuing them at Rs. 2,32,000, but allowed redemption on payment of a fine. The Commissioner (Appeals) upheld the confiscation but reduced the redemption fine from Rs. 58,000 to Rs. 25,000, exercising discretion in this regard. The Tribunal found no reason to interfere with this aspect of the order, given the upheld confiscation and the reduced redemption fine.

Demand of duty and interest:
The original authority confirmed a demand of Rs. 8,15,375 for clearances of water storage tanks during a specified period and imposed penalties under Section 11AC, along with interest under Section 11AB. The Commissioner (Appeals) upheld the duty demand and interest but set aside the penalty under Section 11AC, instead imposing a penalty under Rule 25 of the Central Excise Rules, 2002. The Tribunal restored the original authority's order, reinstating the penalty of Rs. 8,15,375 while reducing the redemption fine.

Imposition of penalties under Section 11AC:
The Tribunal found that the penalties imposed under Section 11AC by the original authority were justified, considering the company's non-compliance with maintaining records and payment of duty. The involvement of the Directors in the company's operations, as evidenced by their statements admitting to non-maintenance of records and non-payment of duty, indicated their knowledge and intention. Therefore, the Tribunal held that the penalties on the Directors should not have been set aside by the Commissioner (Appeals).

Appeal against penalties on Directors:
The Tribunal concluded that the penalties imposed on the Directors were nominal and justified, given their involvement and knowledge of the company's non-compliance. As such, the penalties on the Directors were reinstated, overturning the decision of the Commissioner (Appeals). The Tribunal disposed of the appeals by restoring the original authority's order, reinstating the penalties and reducing the redemption fine as per the original decision.