2009 (8) TMI 603 - AT - Central Excise

Confiscation- Excess goods- The respondents are engaged in the manufacture of Steel Ingots classifiable under Heading 7206.90 of the Schedule to the Central Excise Tariff Act, 1985. The said officers ascertained excess stock of 15.420 MT. of Steel Ingots involving central excise duty of Rs.36,475/-. Representative of the respondent-company failed to explain the reason for excess quantity. The original authority confiscated the excess quantity, and imposed redemption fine of Rs.50,000/- and penalty of Rs.10,000/- on respondent No. I and penalty of Es. 5,000/- on Shri Vinay Bansal, Director, respondent No. 2 herein. Commissioner (Appeals) modified the adjudication order insofar as confiscation and imposition of redemption fine on respondent No. I were set aside and penalty was reduced to Rs. 5,000/-. Penalty on respondent No. 2 also set aside. Hence, Revenue filed these appeals. Held that- , Commissioner (Appeals) after considering the facts and circumstances of the case observed that when the inputs contained in final products have been duly accounted for, there is no question of removal of excess goods clandestinely. In view of the above discussion, I do not find any reason to interfere with the order of the Commissioner (Appeals). Accordingly, appeals filed by the Revenue are rejected.

Summary

Issues: Central Excise duty on excess stock of Steel Ingots, confiscation, redemption fine, penalty, contravention of Rule 10 of Central Excise Rules, mens rea requirement for confiscation, non-entry in RG-1 register, applicability of Rule 25(d).

Analysis:
1. Central Excise Duty and Confiscation: The case involved excess stock of Steel Ingots found during a stock verification, leading to the imposition of central excise duty. The original authority confiscated the excess quantity and imposed fines and penalties. The Commissioner (Appeals) modified the order, reducing the penalties. The issue revolved around whether the excess stock justified confiscation and penalties.

2. Contravention of Rule 10: The Revenue argued that the respondents contravened Rule 10 of Central Excise Rules by failing to account for the excess quantity of goods found during stock verification. The Rule pertains to daily stock accounting, and the failure to explain the excess quantity raised concerns about compliance.

3. Mens Rea Requirement for Confiscation: The respondents contended that mens rea, or guilty mind, is required for confiscation of goods under Rule 10. They cited precedents where mens rea was deemed necessary for such actions, emphasizing the intent to evade duty payment.

4. Non-Entry in RG-1 Register: The Division Bench considered whether non-entry in the RG-1 register alone justified confiscation of goods. The absence of evidence indicating clandestine removal or other irregularities raised doubts about the basis for confiscation solely due to non-entry in the register.

5. Applicability of Rule 25(d): The applicability of Rule 25(d) of Central Excise Rules, which provides for confiscation of goods for contravention with intent to evade duty payment, was a key consideration. The Tribunal's decision highlighted the importance of intent and past conduct in determining confiscation.

6. Decision and Rationale: After evaluating the arguments and precedents, the Tribunal upheld the Commissioner (Appeals) decision, rejecting the Revenue's appeals. The Tribunal found no justification for interfering with the order, emphasizing that the excess quantity of goods did not indicate clandestine removal. The absence of mens rea and insufficient evidence to support confiscation led to the rejection of the appeals.

This detailed analysis of the judgment highlights the key issues, arguments presented by both parties, relevant legal provisions, and the Tribunal's decision based on the facts and legal principles involved in the case.