2012 (11) TMI 260 - AT - Central Excise

Demand along with interest and penalty - Confiscation of goods alleged that shortage of transformers were lying in the factory which was not accounted anywhere alleged that transformers which were not accounted for in the records, were intended for clearance without payment of duty argument of assessee is that they account these goods only when the goods are fully ready for dispatch - Held that - Three transformers produced on 14-12-2009 may not be lead to the conclusion that there was no shortage on the date of visit - argument of assessee is that they account these goods only when the goods are fully ready for dispatch - they are not able to locate three of the 15 transformers accounted just before despatch shows that the goods have been despatched without payment of duty - time consumed in counting the 537 transformers in semi-finished stage cannot be a reason for not being able to show the 15 transformers which were accounted as finished transformers - it is justified to demand excise duty on goods found short vis-a-vis accounted stock - appeal is allowed partially by setting aside the confiscation of goods

Summary

Issues:
1. Shortage of transformers found during stock verification.
2. Allegation of clearance without payment of duty.
3. Confiscation of unaccounted transformers.
4. Imposition of penalty and interest.

Issue 1: Shortage of Transformers
The appellants, manufacturers of Electrical Transformers, were visited by Central Excise officers who found a shortage of one transformer of 6.3 KVA and two transformers of 40 KVA, out of 15 transformers accounted for in RGI. Additionally, 537 transformers were found unaccounted in the factory.

Issue 2: Allegation of Clearance Without Payment of Duty
The Revenue alleged that the unaccounted transformers were intended for clearance without duty payment. A show cause notice was issued demanding excise duty on the three missing transformers, along with interest, penalty, and proposing confiscation of the 537 unaccounted transformers.

Issue 3: Confiscation of Unaccounted Transformers
Upon adjudication, the demand for excise duty on the missing transformers was confirmed, along with interest and penalty. The 537 unaccounted transformers valued at Rs. 8,55,89,306/- were confiscated, with a duty of Rs. 70,52,558/-, allowed to be redeemed on payment of a fine of Rs. 18 lakhs. A penalty of Rs. 70,52,558/- was imposed under Rule 25 of Central Excise Rules, 2002.

Issue 4: Imposition of Penalty and Interest
The appellants argued that the unaccounted transformers were semi-finished goods, following a specific procedure of accounting for goods in a semi-finished state until fully ready for dispatch. They contended that the shortage was due to difficulties in locating transformers during stocktaking. The Revenue maintained that the missing transformers were cleared without duty payment, despite later production. The Tribunal noted the lack of clear directives on when transformers should be entered in the RGI register, ultimately setting aside the confiscation of the unaccounted transformers. However, the Tribunal upheld the duty confirmed on the three missing transformers and the penalty imposed.

In conclusion, the appeal was partially allowed by setting aside the confiscation of goods and providing consequential relief, while refusing relief regarding the confirmed duty on the missing transformers and the imposed penalty.