2007 (10) TMI 123 - AT - Central Excise

Excess of raw material and finished goods Demand can t be raised when finished goods weren t redeemed & cleared from factory, as there is no clandestine removal Confiscation is not justified for procedural mistake of non-accountal of goods Penalty reduced for not maintaining proper records.

Summary

Issues:
1. Confirmation of demand of duty on seized finished goods.
2. Confiscation of excess raw materials and imposition of duty.
3. Imposition of penalty for non-maintenance of records.

Analysis:
1. The appellants, engaged in manufacturing organic chemicals, had excess finished goods and raw materials during a visit by Central Excise officers. The Assistant Commissioner confirmed a duty of Rs. 54,688 on the finished goods, along with confiscation and penalties. The Commissioner (Appeals) upheld this order. However, the Tribunal observed that duty confirmation on unredeemed seized goods, which were not cleared by the appellants, was unjustified. The authorities compelled payment even when the goods were not redeemed, contrary to basic excise law. The Tribunal found no justification for confiscation of finished goods meant for future clearance, as the appellants would pay duty upon clearance. The explanation provided by the Director regarding unrecorded production was deemed acceptable.

2. The authorities also confiscated excess raw materials and imposed duty under Section 11A of the Central Excise Act, 1944. The Tribunal questioned the liability of the appellants for duty on non-manufactured raw materials due to record discrepancies. Referring to a previous case, the Tribunal noted that confiscation rules applied to finished goods, not raw materials. Consequently, the Tribunal set aside the confiscation of finished products and raw materials, along with the duty demand on raw materials. The appellants were directed to pay duty on finished goods upon clearance.

3. Regarding penalties for record-keeping lapses, the Tribunal acknowledged the appellants' lack of proper record maintenance, although there was no intent for clandestine activities. A penalty under Rule 25 was deemed appropriate for record non-compliance. The Tribunal reduced the penalty imposed on the appellants to Rs. 2,000 and set aside the penalty on the Director. Both appeals were disposed of accordingly, with the Tribunal's detailed analysis providing clarity on duty, confiscation, and penalties in the context of excise law.