2014 (8) TMI 178 - AT - Central Excise

Clandestine removal of goods - Discrepancy in stock - non accounting of finished goods in RG-1 register - Held that - shortage by itself is no indication of clandestine removal. Mere payment of duty, to buy peace with the department, does not lead to the conclusion of clandestine clearance. One such reference can be made to Allahabad High Court decision in the case CCE Vs. Meenakshi Castings (2011 (8) TMI 896 - ALLAHABAD HIGH COURT). Appellants have been unable to give any explanation for such a huge quantity of Kraft paper, which was not recorded in their RG-I register - in the absence of any evidence to show that the raw material for the excess found goods were reflected in the raw material account, the said fact goes against him. This clearly shows that the raw material for the excess Kraft paper was not entered in the raw material account. Otherwise also the appellants have not taken any ground before the authorities below that the said excess found goods were manufactured out of the duly accounted for raw material, in which case it is recorded in the statutory records and cannot escape duty - Penalty and redemption fine upheld - Decided partly in favour of assessee.

Summary

Issues:
1. Confirmation of demand for shortages and imposition of penalty.
2. Confiscation of excess found Kraft paper and imposition of penalty.
3. Appeal against the penalties imposed.

Analysis:
1. The appellants, engaged in manufacturing MS ingots and Kraft paper, were subjected to stock verifications by Central Excise officers. Shortages in MS ingots and excess Kraft paper were noted. The original adjudicating authority confirmed a demand of &8377; 65,336/- for shortages and imposed penalties. The excess Kraft paper was confiscated with a redemption fine of &8377; 25,000/- and a penalty of &8377; 33,677/-. Additionally, a penalty of &8377; 15,000/- was imposed on an employee. The Commissioner (Appeals) upheld the appeal but set aside the penalty on the employee.

2. The appellant contested the penalties, arguing no evidence of clandestine removal existed despite not contesting the duty on the short found goods. The Tribunal had previously held that a shortage alone does not indicate clandestine removal. Referring to a case, it was noted that mere payment of duty does not imply clandestine clearance. Consequently, the penalty for shortages was set aside.

3. Concerning the excess Kraft paper, the appellants failed to provide a satisfactory explanation for the unrecorded quantity. The absence of the excess raw material in the records indicated a lack of proper accounting. The appellants did not claim that the excess goods were manufactured from duly recorded raw materials. Therefore, the confiscation of the excess goods was upheld, along with the redemption fine and penalty. The goods had been entered provisionally in the register, and the duty was paid upon clearance.

In conclusion, the appeal was disposed of with the penalties for shortages being set aside due to lack of evidence for clandestine removal. The confiscation of excess goods, redemption fine, and penalty were upheld as proper explanations or evidence were not provided for the unrecorded Kraft paper.