2019 (6) TMI 3 - AT - Central Excise

Clandestine removal - Department took the view that the endorsement in the ground plan of Guindy unit by the Superintendent did not appear to show that permission was accorded to M/s. CMS to remove and store their non-duty paid goods at the premises of M/s. MOC - HELD THAT - In the present case, the impugned goods were being stored outside the factory premises of M/s. CMS. They were thus only being stored in the premises of their sister unit. Removals of goods have been meticulously entered in the R.G. 1 returns required to be filed by M/s. CMS from time to time. There is also no allegation that some or all of the goods which had been so shifted from M/s. CMS to M/s. MOC had been clandestinely removed therefrom or diverted without discharge of duty liability - On the other hand, as per the facts on record, M/s. CMS had paid duty on the machineries manufactured by them and transferred to Guindy unit, albeit on a notional value, and, at the time of clearance of complete machineries, they would pay the appropriate duty on the actual value, after adjusting the duty earlier paid by them. In respect of the impugned goods, such duty amount paid on provisional basis based on the notional value amounted to ₹ 16,42,425/-, which was, in any case, more than even the enhanced duty demand of ₹ 15,65,921.19/- proposed to be demanded in the corrigendum to the Show Cause Notice - there was nothing mala fide about the practice being followed by M/s. CMS. All the removals, though done only on delivery challans, had been reflected in their R.G. 1 returns. Though specific permission for such removals was not obtained, it cannot be denied that M/s. MOC had got their ground plan endorsed with a portion approved by the jurisdictional Range Superintendent for storing machineries. The appellants could very well have qualified for permission to store the finished goods outside their factory premises in terms of the amendment brought about in Rule 47 ibid with effect from 10.05.1989. At the most, there has been some procedural lapse in not having followed the correct protocol for removal of such goods. We are constrained to note that such a procedural lapse which could have been resolved by suitable warning and/or advice from the Department, has been blown up to this extent. If this is not making a mountain of a mole hill, then what is? Appeal allowed - decided in favor of appellant.

Issues Involved:
1. Excisability of goods.
2. Mala fide intention of the appellant.
3. Procedural lapse and its implications.
4. Limitation period for issuing the Show Cause Notice.
5. Penalty imposition on M/s. CMS and M/s. MOC.
6. Inordinate delay in adjudication.

Detailed Analysis:

1. Excisability of Goods:
The core issue was whether the goods removed from M/s. CMS to M/s. MOC were excisable. The Tribunal highlighted that the goods were partly assembled and stored due to space constraints. The adjudicating authority concluded that the goods were excisable based on their capability of being marketed, mobility, and inclusion in the Central Excise Tariff. However, the Tribunal found that some goods were semi-finished and not marketable, thus not excisable.

2. Mala Fide Intention of the Appellant:
The Tribunal's remand order required the adjudicating authority to determine whether M/s. CMS had any mala fide intention. The adjudicating authority concluded that the removal of goods without payment of duty was not with the Department's knowledge and permission. However, the Tribunal noted that the removals were recorded in R.G.1 returns and there was no evidence of clandestine removal or duty evasion, indicating no mala fide intention.

3. Procedural Lapse and Its Implications:
The Tribunal acknowledged that M/s. CMS did not obtain specific written permission for storing non-duty paid goods outside the factory. However, it emphasized that the procedural lapse should not result in heavy penalties or confiscation. The Tribunal pointed out that the amendment to Rule 47 allowed for such storage under exceptional circumstances, and the procedural lapse could have been resolved with a warning or advice from the Department.

4. Limitation Period for Issuing the Show Cause Notice:
The Show Cause Notice was issued on 04.09.1992 for goods cleared between 29.06.1990 and 20.02.1992. M/s. CMS argued that the demand was barred by limitation and that the extended period could not be invoked due to the absence of mala fide intention. The Tribunal did not explicitly address the limitation issue but focused on the procedural lapse and the absence of mala fide intention.

5. Penalty Imposition on M/s. CMS and M/s. MOC:
The adjudicating authority imposed penalties on both M/s. CMS and M/s. MOC under Rule 173Q and Rule 209A, respectively. The Tribunal found that penalties could not be imposed for mere procedural lapses and that no mala fide intention was established. It also noted that penalties under Rule 209A could not be imposed on a company, referencing the Larger Bench decision in M/s. Steel Tubes of India Ltd.

6. Inordinate Delay in Adjudication:
M/s. CMS argued that the de novo adjudication was done after ten years from the Tribunal's remand order, which was inordinate and fatal to the demand. The Tribunal acknowledged the delay but did not explicitly rule on this ground, focusing instead on the procedural aspects and the absence of mala fide intention.

Conclusion:
The Tribunal set aside the impugned order, stating that the procedural lapse did not warrant confiscation or penalties. It emphasized that the goods were removed due to space constraints and recorded in statutory returns, with no evidence of duty evasion. Consequently, both appeals were allowed with consequential benefits as per law.

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