9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2022 (9) TMI 1056 - AT - Central ExciseClandestine Removal - unaccounted raw material, semi finished goods and finished goods in the premises - failure to produce any record to justify the legal possession of the said goods - Confiscation - penalty - HELD THAT - The appellant admittedly is engaged in manufacture of diaries, calendars etc. All his final products are being manufactured at the same premises with common electricity, labour etc. Even the registrant for two different excise registrations ( one for diary and another for calendar) is same i.e. the appellant. The explanation given by the appellant about the raw materials, semi finished goods and finished goods found at their different premises at the time of search, has not been accepted by the department for want of job work challans for transferring the material by their diary division to calendar division. The transfer of raw material even to its unregistered units i.e. sales office / godown without any job work challan or proper invoices has been the basis for presuming that appellant in general have adopted the dubious method for organising their manufacture, procurement of raw material and clearance of finished /semi finished goods from their premises with the help /abatement of their Director and employees with an intent to evade central excise duty. The department presumed that appellant deliberately did not maintain proper accounts of raw material to prove their actual production and for facilitating the clandestine removal - The goods which have been ordered for confiscation were admittedly lying within the premises of appellants and those include raw material as well. It has been the main ground of the contention of the appellants that Rule 25 is only about confiscating excisable goods and not the raw material. Bare perusal makes it clear that the Rule pertains to excisable goods i.e. goods which are manufactured by the assessee. Since the raw material of assessee cannot be held to be goods manufactured by assessee, same is definitely beyond the scope of confiscation under Rule 25 of Excise Rules. Merely because raw material of an assessee is marketable as such, same can not be held to be the excisable goods. As per Section 2(d) of Central Excise Act, 1944, goods which are subjected to duty of excise are excisable. Hence, these are the goods manufactured for clearance from place of manufacture which are excisable and are thus covered under Rule 25 of Excise Rules. Confiscation of finished and semi -finished goods - HELD THAT - The only evidence is departments presumption based upon the stock found lying in the premises that the goods were in excess and were not accounted. The onus was upon the department to prove the said presumption. It is observed that there is no evidence except the Relied upon documents in Annexure A to the show cause notice. Perusal thereof reveals that except the statements recorded during investigation and the Panchnamas drawn during search, there is no other evidence produced by the department - Otherwise also, it has been a settled law that shortage by itself cannot be held to be a sufficient evidence so as to lead to inevitable conclusion that assessee is involved in unaccounted procurement of raw material and manufacture of excisable goods with the sole intent to clear the same without payment of Central Excise duty leviable thereupon. The departmental investigating agencies as well as the adjudicating agencies have not yet started observing compliance of mandatory statutory provisions i.e. section 9D of Central Excise Act, 1944 and section 138 B of Customs Act, 1962 without which the statement recorded at the stage of inquiry / investigation will not be relevant for the purpose of proving the truth of requisite facts during prosecution. It is therefore desired that department may come with certain guidelines so that the efforts of investigating team may not be in vain only for the reason of noncompliance of aforesaid provisions. The order under challenge, as passed by Commissioner (Appeals) ordering confiscation of goods (raw material, finished and semi finished goods) recovered from various premises of appellants and imposing penalties on appellants is hereby set aside - Appeal allowed.
Issues Involved:
1. Confiscation of raw materials under Rule 25 of Central Excise Rules, 2002. 2. Confiscation of finished and semi-finished goods. 3. Allegations of clandestine removal of goods. 4. Compliance with Section 9D of Central Excise Act, 1944, and Section 138B of Customs Act, 1962. Issue-Wise Detailed Analysis: 1. Confiscation of Raw Materials under Rule 25 of Central Excise Rules, 2002: The appellant argued that the confiscation of raw material is beyond the statutory provisions of Rule 25 of Central Excise Rules, 2002, which do not cover confiscation of raw material. The Tribunal examined Rule 25 and concluded that it pertains to excisable goods, i.e., goods manufactured by the assessee. Since raw material cannot be considered as goods manufactured by the assessee, it is beyond the scope of confiscation under Rule 25. The Tribunal supported this conclusion with precedents, including the decisions in Mohit Rollers P Ltd vs CCE, Delhi II and K K Sales vs CCE, Delhi II, which held that there is no provision for confiscation of raw material that has not been accounted for. Consequently, the order confiscating the raw material was set aside. 2. Confiscation of Finished and Semi-Finished Goods: The department's presumption that the goods were unaccounted for and intended for clandestine removal was the basis for confiscation. However, the Tribunal observed that the only evidence presented by the department was the statements recorded during the investigation and the Panchnamas drawn during the search. The Tribunal noted that statements made before the Investigating Officer have no evidentiary value unless taken under oath, as mandated by Section 9D of the Central Excise Act, 1944. The Tribunal cited the decision in CIT v Dhingra Metal Works and J V Strips Ltd. vs CCE, Rohtak to support this view. The Tribunal further stated that mere shortages or unaccounted goods found in the premises are insufficient to prove clandestine removal without tangible evidence, such as excess production details, raw material purchases, dispatch particulars, sale proceeds realization, and power consumption. The Tribunal concluded that the department failed to provide sufficient evidence to justify the confiscation of finished and semi-finished goods, and thus, the order was based on presumptions and assumptions. The confiscation of these goods was also set aside. 3. Allegations of Clandestine Removal of Goods: The department alleged that the appellant adopted dubious methods for organizing their manufacture, procurement of raw material, and clearance of goods to evade central excise duty. The Tribunal observed that the department's allegations were based on the presumption that the goods found during the search were intended for clandestine removal. However, the Tribunal emphasized that the department failed to provide concrete evidence to support these allegations. The Tribunal reiterated that the burden of proof lies with the department to establish clandestine removal with substantial evidence, which was not met in this case. The Tribunal found the allegations of clandestine removal to be unjustified and unsupported by evidence. 4. Compliance with Section 9D of Central Excise Act, 1944, and Section 138B of Customs Act, 1962: The Tribunal noted that the departmental investigating and adjudicating agencies did not comply with the mandatory statutory provisions of Section 9D of the Central Excise Act, 1944, and Section 138B of the Customs Act, 1962. The Tribunal emphasized that statements recorded during the inquiry or investigation are not relevant for proving the truth of requisite facts during prosecution unless these provisions are followed. The Tribunal urged the department to establish guidelines to ensure compliance with these provisions to avoid rendering the efforts of the investigating team futile. Conclusion: The Tribunal set aside the order passed by the Commissioner (Appeals) that ordered the confiscation of raw materials, finished goods, and semi-finished goods, and imposed penalties on the appellants. The Tribunal allowed the appeals, concluding that the confiscation orders were based on presumptions and assumptions without sufficient evidence. The Tribunal also highlighted the need for the department to comply with statutory provisions during investigations and adjudications. (Pronounced in the open court on 21.09.2022)
|
