2011 (9) TMI 554 - AT - Central Excise

Penalty - Visit to Factory - Shartage/Excess of Goods - Held that - If departmental officers not visited the factory, the shortage would have gone undetected - Assessee could not give any explanation for excess stock - contention that the weighment of the waste and scrap is recorded in the records on the basis of eye estimation and actual weighment is done at the time of sale is not acceptable. Since the goods found in excess are not recorded in the daily register, the same are liable for confiscation under Rule 25, the manufacturer are also liable for penalty.

Summary

Issues:
- Appeal against order passed by Commissioner of Central Excise (Appeals)
- Confiscation of excess goods and imposition of duty, fine, and penalty
- Shortage of finished goods and excess stock of waste and scrap
- Discrepancy in weighment methods and stock recording practices
- Applicability of penalties under Sec.11AC and Rule 25 of Central Excise Rules

Detailed Analysis:
1. Appeal Against Commissioner's Order:
The appellants filed an appeal against the order passed by the Commissioner of Central Excise (Appeals) after the confiscation of excess goods, imposition of duty, fine, and penalty. The case involved discrepancies in the weighment of finished goods and stock of waste and scrap, leading to allegations of evasion of duty.

2. Confiscation and Imposition of Duty, Fine, and Penalty:
The department found a shortage of finished goods and excess stock of waste and scrap during a visit to the factory. The appellants admitted the discrepancies and paid the duty for the shortage. The Commissioner (Appeals) upheld the confiscation of excess goods and imposition of fine and penalty under Sec.11AC, ruling that the goods were liable for confiscation under Rule 25 of the Central Excise Rules.

3. Shortage of Finished Goods and Excess Stock of Waste and Scrap:
The appellants argued that the shortage of finished goods was due to errors in the weighment method, and the excess stock of waste and scrap was a result of recording practices based on eye estimation. They contended that there was no intention to evade duty, citing discrepancies in weighment and stock recording methods.

4. Weighment Methods and Stock Recording Practices:
The appellants used a sectional weight method for recording production, which led to discrepancies in weighment compared to actual weighment by departmental officers. They recorded waste and scrap based on eye estimation and only did actual weighment at the time of sale, leading to errors in estimating stock.

5. Applicability of Penalties under Sec.11AC and Rule 25:
The tribunal upheld the penalties imposed under Sec.11AC, citing wilful suppression of production and clandestine removal of goods to evade duty. The appellants' argument that reduced penalty should apply as duty was paid before the show-cause notice was rejected, as mens rea is not essential for penalties under Sec.11AC.

In conclusion, the tribunal dismissed the appeal filed by the appellants, upholding the confiscation of excess goods, imposition of duty, fine, and penalty under Sec.11AC and Rule 25 of the Central Excise Rules. The judgment emphasized the importance of accurate weighment methods and stock recording practices to prevent evasion of duty and upheld the penalties based on the findings of wilful suppression of production and clandestine removal of goods.