2011 (12) TMI 430 - AT - Central Excise

Confiscation of goods - Imposition of redemption fine - Held that - Appellants are not the manufacturer of the goods. They have financed M/s. Jaina Cast Ltd. under hire purchase agreement for purchase of the six machines. When the instalments were not paid by M/s. Jaina Cast Ltd. the appellants took possession of the machines and also informed the department about the same. After going through the show-cause notice issued to the appellants, it is a fact that the confiscation of the machines was proposed under Sec. 9 of the Central Excise Act whereas under the Order-in-Original the machines were confiscated by the Central Excise Authorities under Rule 173Q and Rule 25 of the Central Excise Rules. The appellants were never told about the Rule 173Q and Rule 25 in the show-cause notice. This is also a fact that under Rule 25, the manufacturer, purchaser and registered dealer are covered and the appellants are neither a purchaser, manufacturer or registered dealer - Decided in favour of assessee.

Summary

Issues:
Confiscation of machines under Central Excise Rules, imposition of penalty on appellants.

Detailed Analysis:

Issue 1: Confiscation of machines under Central Excise Rules
The case involved M/s. Electronica Leasing & Finance Ltd. financing machines for M/s. Jaina Cast Ltd., who defaulted on payments, leading to the appellants taking possession of the machines. Central Excise Authorities seized the machines under a panchanama, and a show-cause notice was issued for confiscation under Sec. 9 of the Central Excise Act, 1944. However, the Order-in-Original confiscated the machines under Rule 173Q and Rule 25 of the Central Excise Rules, which were not mentioned in the show-cause notice. The Tribunal found that the confiscation under these rules was improper as the appellants were not informed about them in the notice, and Rule 25 applied to manufacturers, purchasers, and registered dealers, not to the appellants who were merely financiers. Thus, the Tribunal set aside the Order-in-Appeal due to procedural irregularities.

Issue 2: Imposition of penalty on appellants
The authorized representative for the appellants argued that since they were not the manufacturer, producer, or registered dealer of the machines, they could not be penalized under Rule 26 of the Central Excise Rules. The Additional Commissioner for the Revenue contended that the confiscation and penalty were justified as the appellants removed the goods from M/s. Jaina Cast Ltd.'s factory against Central Excise Rules. However, the Tribunal found that the appellants were not liable for penalty under Rule 26 as they were not the manufacturer or dealer, but financiers. The Tribunal, therefore, allowed the appeal, emphasizing that the proceedings against the appellants were not covered under the Central Excise Rules, leading to the setting aside of the Order-in-Appeal.

In conclusion, the Tribunal's judgment focused on procedural irregularities in the confiscation of machines and the imposition of penalties on the appellants under the Central Excise Rules. The decision highlighted that the appellants, as financiers, were not subject to the same rules as manufacturers or dealers, leading to the appeal being allowed and the Order-in-Appeal being set aside.