2015 (10) TMI 1936 - AT - Central Excise

Duty demand - Shortage of goods - Confiscation of goods - CENVAT Credit - Held that - The provisions of Rule 15 of the Central Excise Rules, 2002 under which the excess found raw-materials have been seized are not applicable in as much as the same relate to the inputs on which credit has been wrongly availed. As such, I set aside the confiscation of excess found raw-materials and imposition of penalty on the said ground. But for confirmation of total duty of ₹ 2,39,973 as not contested - Appeal disposed of.

Summary

Issues:
1. Shortage in raw materials leading to duty demand
2. Confiscation of excess raw materials and imposition of penalty

Analysis:
1. The judgment deals with the issue of shortage in raw materials, specifically steel wire rod and alloy wire rod, detected during a visit by Central Excise officers to the factory of the appellants. The shortage resulted in a duty demand of &8377; 1,46,339/- and &8377; 93,634/- respectively. The appellants acknowledged the shortages and debited the Cenvat credit accordingly. However, there was a dispute regarding whether the short found inputs were cleared clandestinely. Additionally, excess raw materials, namely aluminium wire rod valued at &8377; 6,75,518/-, were also found and seized by the officers.

2. Subsequently, proceedings were initiated against the appellants, leading to the passing of the impugned order confirming the duty on the short found goods and imposing penalties. The excess raw materials were confiscated with an option for the appellants to redeem them by paying a redemption fine and a penalty equivalent to the value of the confiscated goods. The appellants challenged the confiscation and penalty, arguing that there is no provision in the Central Excise law for confiscation of raw materials, citing a precedent from the Tribunal.

3. The Tribunal agreed with the appellants' argument, stating that the provisions of Rule 15 of the Central Excise Rules, 2002, under which the excess raw materials were seized, do not apply in this case as they pertain to inputs on which credit was wrongly availed. Consequently, the Tribunal set aside the confiscation of excess raw materials and the imposition of penalty on that ground. However, the total duty amount of &8377; 2,39,973/- was confirmed as uncontested, resulting in the appeal being allowed except for the duty amount.

4. In conclusion, the appeal was disposed of by setting aside the confiscation and penalty related to the excess raw materials while confirming the duty demand. The judgment clarifies the application of rules regarding confiscation and penalties in cases of shortages and excess raw materials in the context of Central Excise law.