2005 (10) TMI 160 - AT - Central Excise

Clandestine removal - excess quantity of 762.176 MT of Steel Billets - goods not reached the RG-1 stage - existence of mens rea or not - HELD THAT - In the present case the Commissioner (Appeals) himself has stated that this unit was closed for the last three years and cumulated difference in stock has arisen over a period of 5 years. He has also found fault with the method adopted by the Central Excise officers in stock taking. It appears that the density of steel billet as 7.8 gms/cc was very high. There is no evidence that the accounts were not maintained with an intention to evade duty. In my view this is a simple case of non-maintenance of accounts. Moreover the stock taking has not been done on the basis of actual weighment. It was done only on the basis of estimates. Hence a difference between the estimate and the RG-1 Register may not be very accurate. As there was no attempt to clear the so called excise goods their confiscation is not warranted - there are no merit the Revenue s appeal and the same is dismissed.

Summary

Issues:
- Confiscation of excess Steel Billets
- Imposition of penalty under Rule 173Q of Central Excise Rules, 1944

Confiscation of excess Steel Billets:
The case involved the confiscation of 762.176 MT of Steel Billets found in excess during a stock taking exercise at the appellants' premises. The Revenue proceeded against the appellants, offering an option to redeem the goods on payment of a fine and imposing a penalty under Rule 173Q of Central Excise Rules, 1944. The Commissioner (Appeals) upheld the penalty but reduced it, citing Tribunal decisions to support the view that goods not yet removed from the factory are not liable to confiscation. The Revenue challenged this decision, arguing that the cited case laws were not applicable to the present scenario. They contended that since the goods were manufactured and stored without proper records, there was a possible intention to remove them clandestinely.

Imposition of penalty under Rule 173Q:
The learned Advocate for the Respondents referenced various case laws to support their argument, emphasizing the necessity of mens rea for imposing penalties under Rule 173Q(1)(b) of the Central Excise Rules. They highlighted that penal provisions should be construed strictly and in favor of the assessee, requiring illegal removal or preparation for removal of goods for penalty imposition. The Tribunal observed that the unit in question had been closed for three years, with a cumulative stock difference over five years. They criticized the stock-taking method and highlighted the lack of evidence of accounts being maintained to evade duty. The Tribunal concluded that the case involved non-maintenance of accounts and inaccuracies in stock estimation, leading to the dismissal of the Revenue's appeal as there was no attempt to clear the goods, rendering confiscation unwarranted.

In the judgment pronounced on 24-10-2005, the Tribunal dismissed the Revenue's appeal, emphasizing the necessity of considering each case based on its unique facts and circumstances. The decision underscored the importance of mens rea for penalty imposition and the strict interpretation of penal provisions in favor of the assessee. The Tribunal's analysis focused on the lack of evidence supporting an intention to evade duty, inaccuracies in stock estimation, and the absence of attempts to clear the goods, leading to the dismissal of the appeal against the confiscation and penalty imposition.