2013 (8) TMI 351 - AT - Central Excise

Excess stock of finished goods and raw-materials on stock taking Held that - Excess in the stock of aluminium ingots is 0.592 M.T. in the total stock of about 87 M.T. would work out to about 0.7%. Similarly, the excess in the stock of aluminium scrap is 11.554 M.T. out of total stock of about 870 M.T. which would work out 1.33% - Excess of this magnitude, looking to the total quantity of aluminium ingots and scrap cannot be treated as a real excess, as the same could be due to genuine mistakes on the part of the assessee or their workers in recording the weight of ingots and scrap and, as such, no malafide intention can be attributed to the excess of this magnitude Reliance can also be place upon the judgment in the case of Hindustan Steel Ltd. vs. CCE reported in 1969 (8) TMI 31 - SUPREME Court, wherein it is held that for imposition of penalty under Rule 173 (1) (a) and 173Q (1) (b) of Central Excise Rules, 1944 there must be intention to evade the payment of duty Decided in favor of Assessee.

Summary

Issues:
1. Confiscation of excess stock of aluminium ingots, scrap, dross, ash, and residue during stock taking.
2. Imposition of penalties on the appellant company and its Director.
3. Appeal against the order-in-original and order-in-appeal regarding the excess stock.

Issue 1: Confiscation of Excess Stock
The jurisdictional Assistant Commissioner ordered the confiscation of excess stock of aluminium ingots, scrap, dross, ash, and residue found during stock taking. The excess quantities were 0.592 M.T. of ingots, 11.554 M.T. of scrap, and 5.325 M.T. of dross and residue. The appellant argued that the percentage of excess was minimal and could be attributed to recording errors. They highlighted the continuous reuse of dross and residue within the factory, availing duty exemption under Notification No. 67/1995-CE. The Tribunal noted that the excess quantities were not substantial considering the total stock, indicating possible genuine mistakes in recording. Citing legal precedents, the Tribunal concluded that there was no intention to evade duty, thus setting aside the confiscation of goods and penalties imposed.

Issue 2: Imposition of Penalties
The appellant contested the penalties imposed on them and their Director. The appellant's counsel argued that there was no evidence to prove that the Director knowingly dealt with goods liable for confiscation. The Departmental Representative defended the penalties, emphasizing the thorough stock taking process and the necessity to account for all materials, even if exempt from duty. The Tribunal considered both arguments and observed that the excess stock, particularly of dross and residue, did not indicate any fraudulent intent. Referring to legal judgments, the Tribunal ruled in favor of the appellant, setting aside the penalties imposed on the company and its Director.

Issue 3: Appeal Against Previous Orders
The appellant had appealed against the order-in-original and the order-in-appeal upholding the confiscation of excess stock and imposition of penalties. The Tribunal reviewed the submissions from both sides, analyzed the stock discrepancies, and assessed the intention behind the alleged excess quantities. Considering the nature of the manufacturing process and the duty exemptions availed by the appellant, the Tribunal found no malafide intent in the discrepancies. Citing relevant legal precedents, the Tribunal allowed the appeals, overturning the previous orders and ruling in favor of the appellant company and its Director.

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