2011 (3) TMI 1343 - AT - Central Excise

Clandestine Removal - Shortages of goods - Proof - Clandestine removal has been accepted by the party inasmuch as they have not contested the duty demanded. - It is fairly evident that this respondent is not an assessee who accounts all goods manufactured. Therefore there is a burden on them to prove that the excess raw material was due to bonafide mistake - The respondent has failed to discharge this burden - Decided against the assessee. Penalty - that the penalty to be imposed under Rule 25 need not be equal to the duty evaded. Therefore, I do not want to interfere with the decision of Commissioner (Appeals) in reducing the penalty from 30,000/- to Rs.10,000/- Redemption fine - Redemption fine cannot be correlated to the duty payable on the inputs because there is no case that such duty has not been paid -redemption fine, normally the guideline is the profit that can accrue to the party due to the proposed clandestine activity should be taken as basis. This would mean that the duty that can be evaded by manufacturing goods clandestinely and removing without payment of duty has to be the reasonable basis - This duty will be more than the duty paid on inputs - find that the redemption fine imposed in the order-in-original is maintainable.

Issues:
1. Verification of stock and discrepancies found.
2. Allegation of manufacturing goods without payment of duty.
3. Confiscation of raw materials and imposition of penalties.
4. Appeal against the order of the Commissioner (Appeals) regarding penalty reduction and confiscation.

Issue 1: Verification of stock and discrepancies found

The case involved a respondent engaged in manufacturing organic composite solvent, classified under Tariff Heading 27101113. During a visit by preventive officers, discrepancies in stock were noted, including shortages in finished goods and raw materials. The discrepancies led to an investigation into the alleged clandestine manufacturing and clearance of goods without duty payment.

Issue 2: Allegation of manufacturing goods without payment of duty

Following the investigation, a show cause notice was issued, resulting in the confirmation of duty amounting to Rs.31,003/- and the confiscation of excess raw materials. Penalties were imposed under various rules, including Rule 15 of Cenvat Credit Rules, 2004, and Rule 25 of the Central Excise Rules, 2002. The respondent was given the option to redeem confiscated goods on payment of fines.

Issue 3: Confiscation of raw materials and imposition of penalties

Upon appeal to the Commissioner (Appeals), the differential duty for short final products was confirmed, but confiscation of excess raw materials and related penalties were set aside or reduced. The department appealed, arguing that the excess inputs indicated violations of Central Excise Rules and justified confiscation. The respondent contended that the discrepancies were due to administrative lapses and cited precedents to support a reduction in penalties.

Issue 4: Appeal against the order of the Commissioner (Appeals) regarding penalty reduction and confiscation

The Tribunal analyzed the arguments and evidence, noting that the excess raw materials were received without justification for the delay in recording. It held that the burden of proof lay with the respondent to demonstrate the discrepancies were not intentional. The Tribunal agreed with the penalty reduction reasoning by the Commissioner (Appeals) and maintained the redemption fine based on potential profits from clandestine activities. Consequently, the Tribunal upheld the confiscation order and redemption fine, partially allowing the respondent's cross objection.

This detailed analysis of the judgment covers the issues of stock verification, duty payment violations, confiscation of raw materials, penalties imposed, and the appellate process, providing a comprehensive overview of the legal proceedings and decisions made by the Tribunal.

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