2011 (8) TMI 881 - AT - Central Excise

Penalty - After verification of physical stock 3.067 MTs of finished goods were found in excess than the book stock - The excess finished goods and excess raw materials were seized on the ground that they were not maintaining the record properly - Undisputedly the excess finished goods and excess raw materials involved in this case the department could not show any evidence that there was any attempt on the part of the respondent to remove the goods clandestinely - Held that the provisions of Rule 25 are subject to the provisions of Section 11AC of the Central Excise Act 1944 and there is not allegation against the respondent that there was any attempt for clandestine removal in this case Regarding confiscation of raw material - under Rule 25 the semi-finished processed goods are not liable to confiscation because Rule 25 is applicable only to the finished excisable goods - Decided in favor of the assessee

Summary

Issues:
Appeal against setting aside penalties under Central Excise Rules and Cenvat Credit Rules.

Analysis:
The case involved an appeal against the setting aside of penalties imposed under Rule 27 of Central Excise Rules, 2002 and Rule 15A of Cenvat Credit Rules, 2004. The appellant contested the Commissioner (Appeals) decision to lift the penalties imposed by the lower adjudicating authority. The respondent, engaged in manufacturing aluminum extrusion profiles, had availed CENVAT credit on input services under Cenvat Credit Rules, 2004. During a physical stock verification, excess finished goods and raw materials were found, leading to confiscation and penalties. The lower adjudicating authority ordered confiscation of seized goods with a redemption fine and imposed penalties under various rules. The Commissioner (Appeals) set aside most penalties except those under Rule 27 and Rule 15A, prompting the Revenue to file an appeal.

The appellant argued that the excess goods found indicated a potential duty evasion if not detected during the stock verification. They cited a Supreme Court decision to support the contention that the case need not be proven with mathematical precision but by a preponderance of probability. On the other hand, the respondent's consultant contended that the excess goods were minimal and not indicative of clandestine removal. They relied on tribunal decisions to support their argument that Rule 25 does not apply to raw materials and that there was no evidence of mala fide intention or fraud. The consultant also highlighted the absence of proof of goods being meant for clandestine removal.

Upon careful consideration, the judge found that the excess goods were not shown to be intended for clandestine removal. Rule 25, which provides for confiscation of finished goods, was deemed inapplicable to the situation, especially considering the excess was less than a day's production capacity. The judge agreed with the respondent that Rule 25 is subject to Section 11AC of the Central Excise Act and that there was no allegation of clandestine removal. Additionally, the judge noted that Rule 25 does not apply to raw materials based on tribunal decisions cited. The judge rejected the Revenue's argument that proof need only be established by a preponderance of probability, emphasizing the lack of evidence indicating goods were manufactured for clandestine removal.

Consequently, the judge upheld the Commissioner (Appeals) order, dismissing the Revenue's appeal for lacking merit. The judgment concluded by affirming the decision in favor of the respondent, emphasizing the absence of evidence supporting the Revenue's claims of duty evasion or clandestine removal.