2015 (1) TMI 986 - AT - Central Excise

Confiscation of goods - Entry not done in RG-1 register - Penalty under Rule 25(1)(b) of Central Excise Rules, 2002 - Held that - The appellants do not dispute the fact of non-accountal of this stock of writing and printing paper which represents more than one day s production. The only explanation given by the appellant is that there was no intention on their part to clear the excess stock without payment of duty. In our view, this explanation is not acceptable, as in terms of the provisions of Rule 25(1)(b) of Central Excise Rules, 2002, penalty under this Rule is attracted for non-accountal of any excisable goods produced or manufactured by an assessee and in this regard mens rea is not required to be established. Therefore, the confiscation of the goods along with the option to the appellant to redeem the same on payment of redemption fine in lieu of confiscation and penalty on appellant company is upheld. Valuation of goods - Inclusion of freight value - Held that - In terms of provision of Section 4 w.e.f. 1-7-2000, the place of removal , in terms of its definition given in Section 4(3)(c) cover only the factory or warehouse where the goods have been permitted to be deposited without payment of duty and from where such goods are removed. It is only with effect from 14-5-2003 that clause (iii) was added to Section 4(3)(c) of the Central Excise Act, 1944 so as to include depot, premises of the consignment agent or any other place or premises from where excisable goods are to be sold after their clearance from their factory , within the definition of place of removal . But during the period from 1-7-2000 to 13-5-2003, the depot or consignment agent s premises were not included in the definition of place of removal . Therefore, during the period till 13-5-2003, the freight expenses from the factory gate to depot would not be includible in the assessable value of the goods and duty demand on this count would not be sustainable. It is only with effect from 14-5-2003 that the depot had also been included in the definition of place of removal and accordingly w.e.f. 14-5-2003 only, the freight expenses from the factory to depot would be includible in the assessable value and accordingly duty demand on this basis would survive only for the period from 14-5-2003 onwards. Thus out of total duty demand of ₹ 2,45,215/-, only duty demand for the period from 14-5-2003 onwards is upheld and balance amount of duty demand for the period from August, 2001 to 13-5-2003 is set aside. Penalty u/s 11AC - Held that - Penalty is imposable on the persons who acquire possession of any excisable goods or are in any manner, concerned in transporting, removing, depositing, keeping, concealing, selling or purchasing or in any other manner dealing with the excisable goods which they knew a bad reason to believe are liable for confiscation. No evidence has been produced by the department that Shri Amit Kumar and Shri R.P. Gupta, the authorised signatories of the appellant company, were involved in any such activity in respect of excisable goods which they knew a bad reason to believe are liable for confiscation. For non-accountal of finished goods in RG I register for which penalty on the appellant company under Rule 25(1)(b) has been imposed, these two persons cannot be penalized by invoking Rule 26. In view of this, penalty under Rule 26 of the Central Excise Rules on Shri R.P. Gupta and Shri Amit Kumar is not called for and the same is set aside. - Decided partly in favour of assessee.

Summary

Issues:
1. Confiscation of excess stock of writing and printing paper
2. Cenvat Credit demand on shortage of inputs
3. Duty demand on non-inclusion of freight charges in assessable value
4. Imposition of penalties on the appellant company and its authorized signatories

Confiscation of Excess Stock:
The judgment upheld the confiscation of 34.079 MT of writing and printing paper not recorded in the RG I register, valued at Rs. 6,47,917. The appellant's explanation of no intention to clear goods without duty payment was deemed unacceptable. Penalty under Rule 25(1)(b) of Central Excise Rules was upheld without the need to establish mens rea.

Cenvat Credit Demand:
Regarding the Cenvat Credit demand of Rs. 59,839 on the shortage of caustic soda lye, the appellants contested the dip reading method's accuracy. The Tribunal found that the dip reading method was standard practice for determining quantities stored and issued. The demand was upheld as the shortage of 24.88 MT could not be attributed to dip reading errors.

Duty Demand on Freight Charges:
The duty demand of Rs. 2,45,215 for the period from August 2001 to September 2003 was based on non-inclusion of freight charges in assessable value for goods cleared to depots. The judgment clarified that until May 13, 2003, depots were not considered a "place of removal," thus freight expenses were not includible. Duty demand was upheld only for the period from May 14, 2003, onwards.

Imposition of Penalties:
Penalties under Section 11AC were deemed applicable only to the extent that Cenvat Credit demand and duty demand were upheld. The penalties imposed on the appellant company and its authorized signatories were reviewed. The penalties under Rule 26 of the Central Excise Rules on the authorized signatories were set aside due to lack of evidence of involvement in activities leading to confiscation.

The main appellant's appeal was partially allowed, with the duty demand upheld only from May 14, 2003, onwards. Penalties on the authorized signatories were set aside. The appeals filed by the authorized signatories were allowed.