2010 (8) TMI 764 - AT - Central Excise

Scrap generated during manufacturing was not entered in stock register - Confiscation and penalty Held that - At the time of visit by the Central Excise officers in the premises of the respondents, inputs, semi-finished goods and finished goods were tallied with the statutory record on physical verification. Only scrap generated in the course of manufacture was not entered in the statutory record. There is no allegation against the respondent that they have cleared the scrap without duty paying invoice or clandestinely - same are not liable for confiscation - When the goods are not liable for confiscation, penalty under Rule 25 is not imposable Penalty under Rule 26 on the Director Held that - Respondent Director failed to enter the scrap generated during the course of manufacture in the statutory record, he is liable to penalty under Rule 26 - penalty under Rule 26 on the respondent Director is confirmed

Summary

Issues:
1. Dropping of penalties and confiscation of seized goods.

Analysis:
The case involved an appeal by the Revenue against the dropping of penalties and the decision that seized goods were not liable for confiscation. During a surprise visit by the Audit Party at the appellant's premises, it was discovered that a quantity of scrap valued at Rs. 1,13,400 involving Central Excise duty was not entered in the statutory record. A show cause notice was issued, leading to the confiscation of the scrap and imposition of penalties on the firm and its Director under Rule 25 and Rule 26, respectively.

The lower Appellate Authority set aside the confiscation and penalties, prompting the Revenue to appeal. Despite notice, no one appeared on behalf of the respondents, and the matter proceeded for final disposal on merits. The Revenue argued that since the scrap generated during manufacturing was not entered in the statutory record, confiscation and penalties were warranted. However, upon review, the judge found that while the scrap was not recorded, there was no evidence of duty evasion or clandestine activities related to the scrap.

The judge concluded that since the goods were not liable for confiscation, penalty under Rule 25 was not applicable. However, the Director's failure to record the scrap in the statutory record made him liable for penalty under Rule 26, which was confirmed at Rs. 10,000. Therefore, the appeals were disposed of with the above observations, emphasizing the importance of maintaining accurate records to avoid penalties and confiscation in such cases.