2013 (6) TMI 441 - AT - Central Excise

Excess stock of stock found during search and seizure - raw material, finished goods and scrap - confiscation - redemption fine - Penalty - Held that - there being no dispute as to finished goods and scrap being present in the factory premises unaccounted in the statutory records, they are liable for confiscation. The value of the such goods which were confiscated approximately comes to Rs.21 lakhs and imposition of redemption fine of Rs.3 lakhs, in my view seems to be excessive. In order to meet the ends of justice, the redemption fine imposed on the seizure of the finished goods as well as the scrap needs to be reduced which in my view should be Rs.1 lakh as against Rs.3 lakhs imposed by the lower authorities. The impugned order to that extent is modified and the redemption fine is reduced from Rs.3 lakhs to Rs.1 lakh. Regarding penalty - Held that - the ends of justice would meet when the penalty is reduced from Rs.3 lakhs. Personal penalty on partners and employees - Held that - the judgment of the Hon ble High Court of Gujarat in the case of Mohammed Farookh Mohammed Ghani 2010 (7) TMI 378 - GUJARAT HIGH COURT , Mahendra Kumar Kapadia 2010 (9) TMI 308 - GUJARAT HIGH COURT and Jai Prakash Motwani 2009 (1) TMI 501 - GUJARAT HIGH COURT will apply - no hesitation in holding the impugned order to the extent it upholds the penalty on the individuals is unsustainable and is liable to be set aside.

Summary

Issues:
1. Confiscation and imposition of redemption fine on raw materials and finished goods.
2. Penalty imposed on the partnership firm, partner, and authorized signatory.

Analysis:
Confiscation and Redemption Fine:
The case involved excess stock of raw materials and finished goods found at the appellant's premises during a search operation. The appellant challenged the redemption fine imposed on the raw materials and finished goods. The Tribunal noted that while there was an admission of purchasing ingots from the open market, the duty status of these ingots was not proven. Citing precedents, the Tribunal held that Rule 25 may not apply to raw materials procured from the market. The confiscation of finished goods and scrap, unaccounted in statutory records, was deemed justified. However, the redemption fine of Rs.3 lakhs was deemed excessive and reduced to Rs.1 lakh to ensure fairness.

Penalty Imposed:
The appellant contested the penalties imposed on the partnership firm, partner, and authorized signatory. The Tribunal reduced the penalty on the partnership firm from Rs.3 lakhs to Rs.1 lakh, considering the liability for confiscation of unaccounted goods. Referring to legal judgments, the Tribunal concluded that penalties on the individuals were unsustainable. Citing specific cases, the Tribunal set aside the penalties on the partner and authorized signatory. Consequently, the penalties imposed on the individuals were revoked, and their appeals were allowed.

In conclusion, the Tribunal modified the redemption fine, reduced penalties on the partnership firm, partner, and authorized signatory, and set aside the penalties on the individuals based on legal precedents and the facts of the case.