2024 (6) TMI 390 - AT - Central Excise

Clandestine Removal - confiscation of goods - penalty - goods were found to be transported outside the factory premises of the Appellant without any documents - physical stocks were found which were not recorded in the Daily Stock Register. HELD THAT - Admittedly, the Appellant is carrying the job-work for IOCL. They get the bulk lubricant from IOCL and the same are converted into smaller pouches by way of re-packing and re-filling. This activity amounts to manufacture in terms of Section 2(f) of the Central Excise Act 1944. After this, necessary Excise Duty is paid on the small pack being cleared by them - the work undertaken by the Appellant is not an activity of normal manufacture wherein the bought out raw materials are converted into finished goods. The appellants are actually undertaking the activity on behalf of IOCL and they are fully responsible for the stock reconciliation to be provided to IOCL after converting the bulk lubricants into smaller pouches. Without any dispute, the goods in question were very much found within the factory premises and they are not seized while they were being transported without any proper document. It cannot be seen as to how the Department can presume that these were unaccounted for goods and are likely to be cleared without payment of Excise Duty. It is also not the case of the Department that the seized goods did not have the marking/emblem of IOCL. This would prove that the goods in question belonged to IOCL only. The Tribunal in the case of KISAN SAHKARI CHINNI MILLS LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE S.T., MEERUT 2016 (9) TMI 937 - CESTAT ALLAHABAD , has held ' Further, I take notice of the fact that the State Excise authority, who are in physical control of the stock of molasses of production, storage and dispatch in the appellant s factory have accepted the recorded stock and at the end of the molasses season have accepted the net excess at 961 qtls. Therefore, I hold that the whole demand is based on assumption and presumptions and is fit to be set aside.' In the present case also, it is clear that the bulk quantity has been given to the Appellant by IOCL for conversion into smaller pouches and the appellants are responsible to reconcile and quantity received and despatched and thus account for the entire stock received by them. With the packed pouches still within the premises, it gets clarified that entire proceedings have been initiated on assumptions and presumptions. The ratio laid down in the cited case law is squarely applicable. The impugned order is not sustainable - Appeal allowed.

Summary

Issues involved: Confiscation of goods under Rule 25 of Central Excise Rules, 2002 and imposition of penalty.

Summary:
The case involved the confiscation of goods valued at Rs.4,42,108/- under Rule 25 of Central Excise Rules, 2002, and imposition of penalty on the Appellant. The Appellants were engaged in packing and filling lubricating oil in pouches from bulk volumes for IOCL. A physical verification revealed unrecorded consignments in pouches, leading to a Show Cause Notice for confiscation and penalty. The Adjudicating Authority confiscated the goods and imposed a redemption fine and penalty. On appeal, the Commissioner(Appeals) upheld the decision, prompting the Appellant to approach the Tribunal.

The Appellant argued that their activity of packing and re-filling pouches amounts to manufacture, as they receive bulk lubricants from IOCL for conversion. They contended that the goods were within their premises and not intended for removal without payment of Excise Duty. The Department justified the confiscation based on unrecorded stocks found during physical verification.

After considering the arguments, the Tribunal observed that the Appellant's activity constituted manufacture under the Central Excise Act 1944. The Appellant, acting on behalf of IOCL, was responsible for stock reconciliation post-conversion. The goods in question were within the factory premises and bore IOCL markings, indicating ownership. Referring to a relevant case law, the Tribunal held that the proceedings were based on assumptions and presumptions, setting aside the impugned order.

Consequently, the Tribunal deemed the impugned order unsustainable and allowed the Appeal with any consequential relief as per law. The judgment was pronounced on 07.06.2024.