2005 (12) TMI 153 - AT - Central Excise

Summary

Issues:
- Confiscation of excess goods found during physical verification
- Reduction of penalty by Commissioner (Appeals)
- Requirement of mens rea for confiscation
- Dispute over non-accountal of goods
- Interpretation of Rule 25 of Central Excise Rules, 2002

Confiscation of Excess Goods:
The appeals filed by the Revenue concern the confiscation of excess goods found during physical verification at the premises of M/s. Magnum Steel Ltd. The central excise officers discovered discrepancies in the stock of finished goods compared to the recorded balance in the daily production register. The original authority confiscated the seized goods but allowed redemption upon payment of a fine. The Commissioner (Appeals) set aside the confiscation and reduced the penalty. The Revenue argued that non-accountal of excess goods makes them liable for confiscation under Rule 25 of the Central Excise Rules, citing legal precedents to support their stance.

Reduction of Penalty:
The Commissioner (Appeals) reduced the penalty imposed on M/s. Magnum Steel Ltd. for non-accountal of goods. The respondents did not contest the penalty reduction, emphasizing that they had no intention to remove goods without payment of duty. Legal arguments were presented by both sides, with the Revenue emphasizing the non-accountal as a basis for penalty imposition.

Requirement of Mens Rea for Confiscation:
The main argument revolved around whether mens rea is necessary for the confiscation of non-accounted goods. The Revenue contended that mens rea is not required for confiscation, citing relevant legal decisions to support their position.

Dispute Over Non-Accountal of Goods:
The respondents explained that the excess quantity found was due to their method of recording production based on raw material usage, leading to discrepancies in weight. They maintained that there was no intent to remove goods without duty payment. The Commissioner (Appeals) upheld the penalty for non-accountal, which was not contested by the respondents.

Interpretation of Rule 25 of Central Excise Rules, 2002:
The Tribunal analyzed the provisions of Rule 25, emphasizing that goods are liable for confiscation if not accounted for by the producer or manufacturer. The Tribunal rejected the explanation provided by M/s. Magnum Steel Ltd. regarding the non-accountal of goods, stating that such practices could lead to irregular record-keeping and potential clandestine clearances. The Tribunal upheld the confiscation of goods and reduced the redemption fines imposed by the original authority.

In conclusion, the Tribunal partly allowed the Revenue's appeals, setting aside the Commissioner (Appeals) order regarding the dropping of confiscation and redemption fines. The Tribunal upheld the confiscation of goods and penalties while reducing the redemption fines in both cases. The decision was pronounced on 9-12-2005.