2013 (4) TMI 218 - AT - Central Excise

Unaccounted goods Confiscation and Penalty - The respondents are manufacturers of various products of mild steel. - Central Excise visited the factory of the respondents and conducted verification of physical stock as compared to accounted stock and found discrepancies and proposed confiscation of goods found in excess and also demanding duty on the goods found short. Held that - In the case of unaccounted goods seized the adjudicating authority has not imposed any penalty under Section 11AC. So tribunal limit the examination of the issue to the question whether penalty provisions of Rule 25 will apply in the facts of the case. - respondents were liable to pay duty on the goods considering the quantum of goods already cleared in the financial year. When at such stage the goods are not recorded in account books and are found in the premises of the factory, the presence of the goods is not satisfactorily accounted for. So the goods are liable to confiscation under Rule 25 and also liable to pay penalty under Rule 25 and thus uphold the confiscation of goods found in excess of recorded stock. However tribunal reduce the redemption fine. In the matter of finished goods found short, tribunal is of the view that in the facts and circumstances of the case the finished goods recorded in books but not found have to be considered as cleared without payment of duty. So the demand for duty is maintainable. Further penalty equal to duty involved is imposable under provisions of Section 11AC of the Act. However tribunal give an option to the respondent to pay 25% of this duty amount within 30 days of receipt of this order for final closure of the matter as per provisions in Section 11AC of the Act. The appeal filed by Revenue is allowed partially.

Summary

Issues Involved:
1. Confiscation of excess goods and imposition of penalty.
2. Demand for duty on goods found short.
3. Applicability of Rule 25 of Central Excise Rules, 2002 and Section 11AC of the Central Excise Act.

Detailed Analysis:

1. Confiscation of Excess Goods and Imposition of Penalty:
The Central Excise officers found discrepancies in the physical stock compared to the accounted stock during their visit to the respondent's factory. The excess goods found included M.S. Ingots, M.S. Square, and M.S. Flat. The adjudication order confiscated these excess goods and imposed a fine of Rs. 3,34,980/- along with applicable duties. A penalty of Rs. 2,18,674/- was imposed under Rule 25 of the Central Excise Rules, 2002. However, the Commissioner (Appeals) set aside the confiscation and penalty, reasoning that the Revenue had not proven any intention to evade duty.

The Tribunal clarified that Rule 25 allows for confiscation of goods if they are not accounted for, irrespective of the intention to evade duty. The expression "subject to provisions of Section 11AC of the Act" in Rule 25 means that where Section 11AC is applicable, its provisions will apply, but it does not necessitate reading the intention of fraud or collusion into Rule 25. Thus, goods not recorded in the books are liable for confiscation under Rule 25(b). The Tribunal upheld the confiscation of goods found in excess and reduced the redemption fine to Rs. 2,45,000/- and the penalty to Rs. 1,00,000/-.

2. Demand for Duty on Goods Found Short:
The adjudication order confirmed a duty demand of Rs. 29,425/- on M.S. Round found short and imposed an equivalent penalty under Section 11AC. The Commissioner (Appeals) set aside the duty demand on the grounds that the Department had not proven the goods were removed without payment of duty but upheld the penalty for not accounting for the goods.

The Tribunal held that the finished goods recorded in the books but not found on the premises should be considered as cleared without payment of duty. Therefore, the demand for duty was maintainable, and the penalty under Section 11AC was justified. The Tribunal restored the duty demand of Rs. 29,425/- and provided an option for the respondent to pay 25% of the duty amount within 30 days for final closure of the matter.

3. Applicability of Rule 25 of Central Excise Rules, 2002 and Section 11AC of the Central Excise Act:
The Tribunal examined the interpretation of Rule 25 and its relationship with Section 11AC. It clarified that Rule 25 applies to situations where goods are not accounted for, and confiscation is warranted irrespective of the intention to evade duty. The Tribunal referenced various decisions to support this interpretation, emphasizing that the presence of goods not recorded in any books of account makes them liable for confiscation under Rule 25(b).

The Tribunal also discussed the statutory obligation to maintain proper records under Rule 10 of the Central Excise Rules, 2002, and the definition of "assessee" under Rule 2(c). It concluded that the respondent was liable to pay duty on the goods found in excess and short, and the penalties imposed were appropriate under the provisions of Rule 25 and Section 11AC.

Conclusion:
The Tribunal partially allowed the Revenue's appeal, upholding the confiscation of excess goods with reduced fines and penalties, and restoring the duty demand and penalty for goods found short. The decision reinforced the applicability of Rule 25 and Section 11AC in cases of unaccounted goods, emphasizing the statutory requirements for maintaining proper records and the consequences of non-compliance.