2017 (6) TMI 992 - AT - Central Excise

Clandestine removal - it appears that the goods which were lying in the factory premises in WIP (Work in Progress) have wrongly been confiscated though the Department mentions that they had the reasonable belief that goods were likely to be removed without payment of duty - Held that - this case appears to be more of unreasonable interpretation of facts and thus committing unreasonable action against the manufacturer assessee. In this case no confiscation was warranted; however, the Department confiscated the goods and imposed redemption fine of unreasonable amount of ₹ 3,25,000/-. There is neither any justification for the confiscation of the goods nor any proper reason to impose high amount of redemption fine for redeeming the confiscated goods - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Confiscation of goods under Rule 25 of Central Excise Rules, 2002
2. Imposition of penalty under Rule 25 of Central Excise Rules, 2002
3. Reasonable belief for confiscation of goods
4. Requirement to maintain raw material account for goods in WIP condition

Confiscation of Goods and Imposition of Penalty:
The appeal involved M/s Ashoka Wire Industries contesting the confiscation of 2625.05 kilograms of copper wire in WIP condition valued at ?13,12,525 under Rule 25 of Central Excise Rules, 2002, with an option to redeem on payment of ?3,25,000. Additionally, a penalty of ?50,000 was imposed on the appellant under the same rule. The Tribunal noted that there was no evidence to support the Department's belief that the goods were likely to be removed without payment of duty, thus deeming the confiscation unjustified.

Reasonable Belief for Confiscation:
The Department's belief that the goods were likely to be removed without payment of duty was challenged by the appellant, citing the absence of a rule mandating the maintenance of a raw material account for goods in WIP condition. The Tribunal considered this case as an unreasonable interpretation of facts, leading to an unjust confiscation and an exorbitant redemption fine. Referring to a previous decision, the Tribunal emphasized the lack of justification for the confiscation and the imposition of penalties without proper reasoning.

Requirement to Maintain Raw Material Account:
The dispute also revolved around the necessity of maintaining a raw material account for goods in WIP condition. The Department's argument that the absence of a raw material account justified the belief that the goods were intended for removal without duty payment was countered by the appellant, highlighting the lack of a binding rule for maintaining such accounts, especially when not claiming Cenvat credit. The Tribunal found this reasoning flawed and held that the absence of a raw material account did not warrant confiscation or the imposition of penalties.

Conclusion:
Following a detailed analysis of the case and submissions from both parties, the Tribunal set aside the lower appellate authority's order, allowing the appeal and providing consequential benefits to the appellant. The confiscation of goods was overturned, leading to the dropping of the redemption fine and penalty imposed. The Tribunal's decision was based on the lack of reasonable belief for confiscation, the absence of a mandatory requirement for maintaining raw material accounts, and the unjustified actions taken against the manufacturer assessee.

This judgment underscores the importance of substantiating reasonable beliefs for confiscation, adhering to relevant rules and regulations, and ensuring proper justifications for penalties and fines imposed in excise matters.