2017 (7) TMI 791 - AT - Central Excise

Whether storage of finished and semi-finished goods, raw materials outside factory premises is permissible or not? Held that - In the present case, the appellant stored the goods outside of the factory premises without the permission of the Commissioner in violation of the provisions of the Notification. The ld.Counsel for the appellant mainly argued that they informed the Range Superintendent. Admittedly, he is not competent authority to allow the storage outside of the factory premises - confiscation justified - In any event there is no suppression of facts with an intent to evade payment of duty and therefore, imposition of penalty under section 11A of the Central Excise Act, 1944 and Rule 15 of Cenvat Credit Rules, 2004 would not be warranted. Redemption fine reduced to ₹ 25,000/- - a general penalty imposed of ₹ 10,000/- - other penalties set aside. Appeal allowed - decided partly in favor of appellant.

Summary

Issues: Storage of goods outside factory premises, confiscation of goods, demand of duty, Cenvat Credit disallowance, imposition of penalty.

Storage of Goods Outside Factory Premises:
The case involved the storage of finished and semi-finished goods, raw materials outside the factory premises. The appellant argued that they stored the goods in a godown outside the factory premises with the permission of the Range Superintendent. However, it was noted that the Range Superintendent was not the competent authority to permit such storage, as per the provisions of Notification No.36/2001-CE. The Tribunal referred to a Supreme Court case emphasizing strict construction of provisions granting exemptions. Consequently, the confiscation of goods was deemed justified due to the violation of the Notification. The appellant's argument of informing the Range Superintendent was dismissed, and it was concluded that there was no suppression of facts to evade payment of duty, thus penalties under relevant sections were not warranted.

Confiscation of Goods and Demand of Duty:
The Adjudicating Authority had confiscated the finished goods, imposed a redemption fine, confirmed a demand of duty, disallowed Cenvat Credit, and imposed penalties. The Tribunal modified the impugned order by reducing the fine to ?25,000 and imposing a general penalty of ?10,000 while setting aside other penalties. It directed the Authority to verify if the goods were subsequently cleared on payment of duty to determine the demand of duty accurately.

Cenvat Credit Disallowance and Imposition of Penalty:
The Commissioner(Appeals) had rejected the appeal filed by the appellant concerning the Cenvat Credit disallowance and penalty imposition. The Tribunal modified the order by reducing the fine amount and imposing a token penalty. It emphasized the need to verify if the goods were eventually cleared on payment of duty to assess the demand of duty correctly. The appeal was disposed of with the modifications mentioned in the order pronounced on 18.07.2017.