2000 (1) TMI 680 - AT - Central Excise

Issues Involved:
1. Alleged suppression of production and clandestine removal of atomised aluminium powder.
2. Shortage of flake aluminium powder and its implications.
3. Procedural discrepancies in maintaining statutory records (RG1 register).
4. Legitimacy of the confiscation of seized goods.
5. Imposition of penalties and duty demands.

Detailed Analysis:

1. Alleged Suppression of Production and Clandestine Removal of Atomised Aluminium Powder:
The appellants, manufacturers of aluminium powder, were accused of suppressing the production of 11,100.792 kgs of atomised aluminium powder valued at Rs. 6,21,644 without accounting for it in statutory records, intending to evade Central Excise duty. During a surprise visit by Preventive Officers, excess stock of atomised aluminium powder was found and seized. The appellants argued that the excess quantity was due to internal transfer within the factory for protection from unseasonal rains and was duly accounted for, challenging the observation that it was meant for clandestine removal.

2. Shortage of Flake Aluminium Powder and Its Implications:
A shortage of 23,158.397 kgs of flake aluminium powder valued at Rs. 15,74,711 was detected. The appellants contended that the shortage was due to the method of approximate calculation used in recording production in the RG1 register, which did not account for the raw material lying on the shop floor. The Collector, however, found the explanation unsatisfactory, noting the lack of a written explanation for the shortage and the potential for clandestine removal.

3. Procedural Discrepancies in Maintaining Statutory Records (RG1 Register):
The appellants admitted to maintaining the RG1 register based on approximate calculations rather than actual weighment, which was objected to in an audit note. Despite instructions to correct this procedure, the appellants continued their method, leading to discrepancies between the RG1 register and physical stock. The Collector noted that this practice was misleading and did not comply with Central Excise Rules, justifying the imposition of penalties and duty demands.

4. Legitimacy of the Confiscation of Seized Goods:
The Collector ordered the confiscation of the excess atomised aluminium powder, suspecting it was intended for clandestine removal. However, the appellate tribunal found that there was no evidence of an attempt to remove the goods outside the factory. Citing precedents, the tribunal concluded that the confiscation was not justified as the goods were still within the factory premises and not packed for removal.

5. Imposition of Penalties and Duty Demands:
The impugned order imposed a penalty of Rs. 10,000 under Rule 173Q of Central Excise Rules and confirmed a duty demand of Rs. 3,95,693. The tribunal upheld the penalty and duty demand, noting the appellants' admitted procedural lapses and the discrepancies in the RG1 register. The tribunal found the appellants' actions were not bona fide and justified the penalties and duty demands.

Conclusion:
The appeal was allowed in part. The order of confiscation of seized goods was set aside, but the penalties and duty demands were confirmed. The tribunal emphasized the importance of maintaining accurate statutory records and compliance with Central Excise Rules to avoid such issues.

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