2008 (10) TMI 139 - HC - Central Excise

Seizure without investigation since seized goods (raw material) have been found entered in stock register and nothing to prove wrongful availment of credit; confiscation cannot be upheld mere for non-entry in computer - continuing detention of goods not justifiable demand of security to release the goods not justified power of conducting search, seizure or investigation has to be exercised reasonably by excise authorities - authorities are not expected to adopt unreasonable attitude

Summary

Issues:
Petition seeking release of seized raw material and quashing of seizure letter.

Analysis:
The petitioner, engaged in manufacturing ingots, had raw materials seized by the Anti-Evasion Branch of Central Excise. The petitioner claimed no irregularities and requested release of the goods without depositing Central Excise Duty. The contention raised was that under the Cenvat Credit Rules, 2004, only finished goods are excisable, and the condition for executing Bond B-11 was unjustified as it applied to finished goods only.

In response, it was argued that the petitioner showed low value addition and paid less duty from the cash account. Discrepancies were found in the stock register and computer entries, leading to allegations of wrongful availment of Cenvat credit. The authorities claimed the goods were liable to confiscation and penalty under Rule 15 of the Cenvat Credit Rules, 2004.

The court noted that the seizure occurred on 15.9.2008, with no progress in the inquiry for over a month. The authorities failed to provide a timeline for completing the investigation, raising concerns of unreasonable delay and potential mala fides. The court emphasized that the power to seize goods must be coupled with a duty to conduct a reasonable investigation promptly.

The court found that there was no strong prima facie case for confiscation of goods justifying continued detention or demand for security. It was highlighted that the terms imposed for release of goods must be fair and reasonable, with a nexus to safeguarding potential duty demands. The court partly allowed the petition, directing the release of goods upon the petitioner furnishing an undertaking to pay any dues found due, without requiring cash security or bank guarantee.

Furthermore, the court directed the Secretary, Ministry of Finance, Government of India, to investigate the matter and file an affidavit within two months. The case was scheduled for further consideration after the affidavit submission to address concerns of unreasonable delay and potential mala fides by the authorities in conducting the investigation.