2011 (7) TMI 608 - AT - Central Excise

Confiscation and denial of credit - appellants, registered with Central Excise for manufacture of zarda, chewing tobacco - confiscation of the cut tobacco, found in excess, on the ground that they have not been recorded in the RG I register - confiscation of packing material - denial of modvat credit on the packing material found in excess - appellant submitted that cut tobacco was tobacco which was remnant after manufacturing activity and hence need not be accounted in the RG register as they are not finished goods - Held that - If it is admitted fact that the goods which were found in excess were cut tobacco (as per panchnama) then there is no need to account them in the RG I register. In view of this, confiscation and demand of duty on 609 Kgs. of cut tobacco does not seems to be in accordance with the law. The demand is unsustainable, hence demand and confiscation on such cut tobacco are set aside. There is no allegation that packing materials were removed from the factory premises on which Cenvat credit was availed. Further, there is no provisions in the Rules which indicate to re-calculate the amount of Cenvat credit attributable to the excess goods found in the factory premises and raise a demand. In our considered view, the Cenvat credit reversal on the packing material could have been correct if they have been found short than the recorded balance. Order is set aside and the appeal is allowed.

Summary

Issues:
Confiscation of cut tobacco and packing material under Central Excise Rules, denial of Modvat credit, demand of duty on cut tobacco, and penalty imposition.

Confiscation of Cut Tobacco:
The appeal challenged the confiscation of cut tobacco and packing material due to discrepancies found during a visit by Central Excise officers. The appellant argued that cut tobacco was not a finished product but a remnant after manufacturing chewing tobacco, hence not required to be recorded in the RG I register. The Commissioner (Appeals) had considered the cut tobacco as finished goods, leading to confiscation and duty demand. However, the Tribunal disagreed, noting that the panchnama described the cut tobacco as raw material, not finished goods. As per the law, only manufactured finished goods should be recorded in the RG I register. Therefore, the demand and confiscation of duty on cut tobacco were deemed unsustainable and set aside.

Denial of Modvat Credit:
Regarding the denial of Modvat credit on excess packing material, the Tribunal observed that the goods were found in excess but not removed from the premises with Cenvat credit availed. The absence of provisions to recalculate Cenvat credit for excess goods led the Tribunal to conclude that the credit reversal on packing material would have been appropriate if the goods were found short, not in excess. Consequently, the Tribunal found the impugned order unsustainable and set it aside, allowing the appeal.

In conclusion, the Tribunal ruled in favor of the appellants, setting aside the order of confiscation and duty demand on cut tobacco, as well as rejecting the denial of Modvat credit on excess packing material. The judgment emphasized the importance of proper interpretation of Central Excise Rules and the necessity to adhere to statutory records for maintaining accurate accounts of finished goods and excisable items.