2016 (12) TMI 525 - AT - Central Excise

Clandestine removal of goods - confiscation u/r 25 of Central Excise Rules, 2002 and imposition of penalty on Managing Director of the company - appropriation of bank guarantee - whether the appellant had duly accounted for the excess finished goods alleged to have been found during the time of search? - Held that - The confiscation is ordered on the presumption that appellant would have removed the goods without payment of duty. In fact, the appellant has paid duty on the goods as per the duty determined. In the case of Quippo energy Pvt.Ltd. Vs CCE&ST,Ahmd. 2015 (10) TMI 1726 - CESTAT AHMEDABAD the Tribunal held that if goods are not available, the same cannot be confiscated. In the instant case, the goods were provisionally released and appellant cleared them by paying duty. Therefore, I hold that the confiscation and the imposition of redemption fine is without any legal basis and therefore, liable to be set aside. The statement of Shri Shiva Kanth shows that the appellant was indulging in clandestine removal of goods. This evidence together with the admitted fact that the appellant had not accounted the stock of Cefrozil and Cefdinir in the RG 1 register, would attract the provisions under Rule 26 of Central Excise Rules, 2002. However, in this regard the penalty of ₹ 10,00,000/- imposed on Shri M. N.Reddy Managing Director is on the higher side. A penalty of ₹ 1 lakh in my view would meet the ends of justice. I set aside the order of confiscation. The penalty imposed on Shri M.N.Reddy is reduced to ₹ 1,00,000/-. The impugned order is modified to the above extent - appeal allowed - decided partly in favor of assessee.

Summary

Issues:
Alleged clandestine removal of goods, confiscation of seized goods, penalty imposition on Managing Director.

Analysis:

Alleged Clandestine Removal of Goods:
The appellant, engaged in manufacturing bulk drugs, faced allegations of clandestine removal of goods based on incriminating documents found during a search. The show cause notice issued accused the appellant of contravening Rule 10 of Central Excise Rules, 2002 by not accounting for excess goods in the statutory daily stock register. The appellant argued that they had properly accounted for finished products in the RG 1 register, highlighting specific entries to support their claim. The department contended that the appellant did not account for 800 kgs of Cefpodoxime Proxetil, leading to the confiscation of goods and imposition of penalties.

Confiscation of Seized Goods:
The Original Authority ordered the confiscation of seized goods, including Cefpodoxime Proxetil, Cefrozil, and Cefdinir, due to alleged discrepancies in stock records. As the goods were not physically available for confiscation, a redemption fine was imposed. The appellant argued that since the goods were provisionally released and later cleared by paying duty, confiscation was unjustified. The Tribunal scrutinized the RG 1 register entries and found discrepancies in the department's allegations regarding the unaccounted goods, leading to the setting aside of the confiscation order.

Penalty Imposition on Managing Director:
The penalty of &8377; 10,00,000 imposed on the Managing Director for alleged involvement in clandestine removal and non-accounting of goods was deemed excessive. The Tribunal acknowledged evidence of clandestine removal and non-accounting of certain goods but reduced the penalty to &8377; 1,00,000, citing Rule 26 of Central Excise Rules, 2002. The judgment emphasized that penalties should be proportionate to the offense, thus modifying the original penalty amount.

In conclusion, the Tribunal allowed Appeal No.1053/2009, set aside the confiscation order, and reduced the penalty on the Managing Director in Appeal No.1054/2009, ensuring justice while considering the legal provisions and evidence presented during the proceedings.