2021 (11) TMI 115 - AT - Central Excise

Levy of Redemption Fine in lieu of Confiscation - clearance of goods under payment of CVD - revenue neutral situation - HELD THAT - Not only the appellant s staff during investigation but appellant through its synopsis submitted on 17/03/2020 admitted that in few cases where there was upward revision in MRP, the appellant on their own paid the differential CVD. This admission is sufficient to establish that there was manufacturing activity undertaken by the appellant like upward revision of MRP and its affixture on repacked goods. It is a settled rule that CVD is paid to counter balance the central excise component, so as to protect the indigenous manufacturer and it is refunded after the imported goods are sold in the local market upon payment of VAT/GST. Therefore, it is mainly a level playing event and not a tax collection activity. Appellant being not a registered concern is liable for penal action only on this count. In view of admission of appellant itself which needs no further proof in view of Section 56 of the Indian Evidence Act, that in some cases the MRP has been charged with upward revision - Appeal dismissed.

Summary

Issues:
Confirmation of redemption fine in lieu of confiscation of seized goods under Section 34 of the Central Excise Act, 1944.

Analysis:
The case involved the confirmation of a redemption fine of ?25,00,000 imposed by the Commissioner of GST & Central Excise in lieu of confiscation of seized goods. The appellant, engaged in labeling and repacking imported products, was accused of manufacturing activities without proper registration. The Commissioner held that although no central excise duty was payable due to revenue-neutral clearance of goods, the affixing of MRP/relabeling at the warehouse constituted manufacturing activity. The redemption fine was imposed as the appellant was unregistered under the Central Excise Act.

During the appeal, the appellant argued that since the demand for excise duty on cleared goods was dropped, the same principle should apply to the seized goods. Citing legal precedents, the appellant contended that penal provisions cannot be upheld when a demand is dropped. The appellant's counsel emphasized that the redemption fine was penal in nature and should be set aside.

The Respondent-Department presented evidence, including statements and photographs, to support the claim of manufacturing activity at the unregistered warehouse. The Department argued that the appellant failed to provide evidence of CVD payment on the seized goods, justifying the imposition of the redemption fine. Reference was made to a Tribunal case supporting penal action against unregistered manufacturing activities.

After considering both sides, the Member (Judicial) upheld the Commissioner's order. The Member noted the appellant's admission of paying differential CVD in some cases, indicating manufacturing activity. Emphasizing the significance of CVD in balancing excise components, the Member concluded that the appellant, being unregistered, was liable for penal action. The manufacturing activities, as per legal definitions, were deemed to have transformed the seized goods, justifying the redemption fine. The appeal was dismissed, confirming the Commissioner's order of redemption fine.

In conclusion, the judgment upheld the imposition of the redemption fine for unregistered manufacturing activities, emphasizing the importance of compliance with excise laws and penal consequences for violations.