2012 (10) TMI 871 - AT - Central Excise

Excess quantity sugar as compared with the daily stock account - sold to the shareholders at concessional rate - confiscation of sugar allowed to be released on payment of fine and penalty equal to duty involved - Held that - There was a clearance of 2500 quintals of sugar under one invoice and unfortunately the invoice is illegible and it could not be made out in whose name the invoice has been made. However, entire quantity of 2500 quintals of sugar has been cleared on payment of duty - the appellants have been very consistent in submitting that quantity of 2500 quintals of sugar was meant for sale to the share holders at concessional rate and 1500 quintals has been sold as such and 1000 quintals remained, the benefit of doubt in the absence of proper investigation has to go to the assessee. As the offence has to be treated as one of procedural irregularity and penalty equal to duty was not warranted - thus in the facts and circumstances of the case, the payment of duty on the goods and non-claiming of refund of the same, penalty under Rule 25 for procedural irregularity will be sufficient and since excess sugar was lying and subsequently cleared on payment of duty, redemption fine also is not warranted. The penalty of Rs.5,000/- u/r 25 would meet the ends of justice, while upholding the demand for duty on 1000 quintals of sugar found excess during the visit of the officers and accepting the submissions made by the assessee that no refund of duty will be claimed - partly in favour of assessee.

Summary

Issues:
1. Excess stock of sugar found during a factory visit.
2. Allegation of procedural error in clearing stock.
3. Dispute over duty payment and penalty imposition.
4. Lack of proper investigation by the Department.
5. Determination of penalty and duty payment.

Analysis:
1. The appellant, engaged in sugar and molasses manufacturing, was found with 1000 quintals of excess sugar during a stock taking visit. The excess arose due to a decision to sell 2500 quintals at a concessional rate to shareholders, but not all shareholders lifted their share, resulting in the surplus stock.

2. The appellant argued that the excess stock was a procedural error, as they cleared the entire stock at once instead of individual invoices to shareholders. The Department contended that the appellant failed to explain the excess stock adequately and lacked documentary evidence to support their claim.

3. The Tribunal noted that the appellant had submitted evidence of quantity allocation to shareholders before the Commissioner (Appeals). However, the Department did not thoroughly investigate the claim of procedural error and failed to establish the excess stock as unaccounted. The Tribunal emphasized the necessity for the Department to verify claims made by the assessee in such cases.

4. After considering all submissions and circumstances, the Tribunal found that the appellant consistently maintained the purpose of clearing 2500 quintals for shareholders at a concessional rate. Due to the lack of proper investigation and illegible invoice, the benefit of doubt was given to the appellant, treating the offense as a procedural irregularity.

5. Consequently, the Tribunal decided that a penalty equal to the duty was not warranted, and the appellant agreed not to claim a refund of the duty already paid. A penalty of Rs. 5,000 under Rule 25 for procedural irregularity was imposed, upholding the duty demand on the excess sugar found during the visit, while no redemption fine was deemed necessary in this case.