2013 (9) TMI 616 - AT - Central Excise

Confiscation of raw material - scope of Rule 25 - Excisable goods procured as raw materials found in the factory premises were not stored in a routine manner, but were purposely kept unaccounted - Categorical statement of the Director, Mr. Kamalesh Ladha, that the said excisable goods were procured with a specific intention to use it as raw material in the manufacture of finished excisable goods intended to be removed clandestinely without payment of duty Held that - Clause (b) of Rule 25(1) of Central Excise Rules, 2002 could be invoked for confiscation of the said non-accounted excisable goods stored in the factory premises for its use as raw materials by a manufacturer In none of the judgments referred to by the appellant, admission like the one made by the Director, Shri Ladha that the raw materials were procured with an intention for its utilization in the manufacture of finished goods meant to be removed without payment of duty, was present - Therefore, the judgments referred to by the ld. Advocate are not applicable to the facts of the present case Appeal rejected Decided against the Assessee. Meaning of excisable goods used in the Rule 25 of the Central Excise Rules, 2002 Submitted by appellant that expression excisable goods mentioned in clause (b) of the said sub-rule, refers only to the goods manufactured by the manufacturer Held that - The said Rule 25 is a penal provision and enumerates various situations and clause (b) of the sub-rule (1) is directed against non-accountal of excisable goods produced or manufactured or stored refers, inter alia, also to a manufacturer, who does not account for any excisable goods produced or manufactured or stored by him. The word or in the said clause should be read disjunctively - Excisable goods defined at Sec. 2(d) of Central Excise Act, 1944 as goods specified in the First Schedule and the Second Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) as being subject to a duty of excise and includes salt - Besides, the use of the word any before the word excisable goods, in the said clause, makes it more clear and points out to a plausible interpretation that the said Rule is not only refers to the excisable goods manufactured and stored in the factory by a manufacturer but also excisable goods manufactured elsewhere and stored in the factory. - Decided against the assessee.

Issues Involved:
1. Confiscation of unaccounted raw materials under Rule 25 of the Central Excise Rules, 2002.
2. Imposition of penalties on the appellant and its director under Rules 25 and 26 of the Central Excise Rules, 2002.

Detailed Analysis:

1. Confiscation of Unaccounted Raw Materials:
The core issue revolves around whether unaccounted raw materials found in the factory premises can be confiscated under Rule 25 of the Central Excise Rules, 2002. The appellants argued that Rule 25 applies only to excisable goods manufactured or produced by a manufacturer and not to raw materials stored for potential use in manufacturing excisable goods intended for clandestine removal. They contended that mere suspicion or presumption cannot justify confiscation and cited several precedents to support their stance.

However, the Department countered that the raw materials were found in excess and unaccounted during a search based on specific information. The Director of the appellant company admitted that the raw materials were procured for unaccounted manufacture and clandestine clearance of finished goods. The Department argued that this admission, coupled with the physical evidence, justified confiscation under Rule 25(1)(b) of the Central Excise Rules, 2002.

The Tribunal noted that Rule 25(1)(b) penalizes non-accountal of excisable goods produced, manufactured, or stored by a manufacturer. The term "excisable goods" includes both goods manufactured by the manufacturer and those procured and stored in the factory. The Tribunal held that the unaccounted raw materials were stored with the specific intention to use them in the manufacture of finished goods for clandestine removal, thus falling within the purview of Rule 25(1)(b). Consequently, the confiscation of the unaccounted raw materials was upheld.

2. Imposition of Penalties:
The second issue pertains to the imposition of penalties on the appellant and its director under Rules 25 and 26 of the Central Excise Rules, 2002. The Adjudicating Authority had imposed penalties on the appellant company and its director for the non-accountal of excisable goods and the intention to use unaccounted raw materials for clandestine manufacture and removal of finished goods.

The Tribunal observed that the Director's statement admitting to the unaccounted procurement and storage of raw materials for clandestine manufacture was not retracted. This admission, along with the physical evidence of excess raw materials, justified the imposition of penalties. The Tribunal emphasized that Rule 25(1) covers situations where excisable goods, whether manufactured or procured, are not accounted for and stored with the intent to evade duty.

Therefore, the penalties imposed on the appellant company and its director were found to be in accordance with the law. The Tribunal dismissed the appeals, upholding the orders of the lower authorities.

Conclusion:
The Tribunal concluded that the unaccounted raw materials found in the factory premises were liable for confiscation under Rule 25(1)(b) of the Central Excise Rules, 2002, as they were stored with the intention to use them in the manufacture of excisable goods meant for clandestine removal. The penalties imposed on the appellant company and its director were also upheld, as the non-accountal and intention to evade duty were clearly established. Consequently, the appeals were dismissed.

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