2017 (10) TMI 267 - AT - Central Excise

Confiscation - excess stock of raw material, namely, Polyester Chips - whether the excess raw material namely, polyester chips of 11,701 Kgs found in the premises of the appellant are liable for confiscation, and personal penalty on the Director liable to be imposed? - Held that - the said raw materials were procured from the open market and accordingly, CENVAT credit was not availed being not accompanied with duty paid excise invoices - There is no evidence brought on record by the Revenue that these raw materials had been procured to be used in the manufacture of finished goods later to be cleared without payment of duty. In these circumstances, therefore, confiscation of the excess goods found in the factory premises cannot be sustainable - personal penalty on the Director also cannot be sustained - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Confiscation of excess raw material found in the factory premises.
2. Imposition of personal penalty on the Director.

Confiscation of Excess Raw Material:
The case involved an appeal against an order passed by the Commissioner of Central Excise (Appeals) Surat-II regarding the confiscation of excess raw material, specifically polyester chips, found in the appellant's factory. The appellant argued that the raw material was purchased from the open market without duty paid documents, thus no CENVAT credit was availed. The appellant relied on a Supreme Court judgment stating that goods purchased from the open market are deemed duty paid unless proven otherwise by the department. The appellant contended that there was no admission of illicit procurement for duty-free finished goods manufacturing. As per the evidence, the raw materials were bought from the open market without duty paid excise invoices, and payments were made through cheques. The tribunal found that there was no proof that the raw materials were intended for duty-free finished goods production. Consequently, the confiscation of the excess raw material was deemed unsustainable, and the appeal was allowed.

Imposition of Personal Penalty on the Director:
The second issue revolved around the imposition of a personal penalty on the Director under Rule 209A of the erstwhile CER, 1944. The appellant argued that the penalty was baseless and unsustainable. The tribunal noted that since the confiscation of the excess raw material was found to be unsustainable, the personal penalty on the Director could not be upheld either. As a result, the tribunal set aside the impugned order and allowed the appeals. The judgment highlighted that the burden of proof regarding the duty status of goods purchased from the open market lies with the department, and in the absence of evidence indicating illicit procurement for duty-free manufacturing, confiscation and personal penalties cannot be justified.

This judgment underscores the importance of proper documentation and evidence in excise cases, emphasizing that the burden of proof rests with the department to establish non-compliance. It also showcases the significance of legal precedents in interpreting and applying excise laws to specific cases, ensuring a fair and just outcome for the parties involved.