2013 (7) TMI 638 - AT - Central Excise

First Stage / Second stage dealer - Excess goods found than the recorded value Seizure of excess goods - Respondent is a first stage dealer registered with the Central Excise Department - Confiscation of the seized goods have been ordered on the basis of statement of Sh. P.K. Aggarwal, Area Sales Manager Held that - There is no other evidence corroborative or otherwise to show that the appellants had indulged in clandestine removal of the impugned goods - The appellant is a 1st stage dealer and not a manufacturer - Respondent have taken a categorical stand that inasmuch as they have not received the papers, no entries were made in their records - There is no allegation that the respondent was in the process of passing on the modvat credit to buyers. Once the goods are not recorded in the records maintained by the first stage dealer, he cannot be held liable for passing on unwanted cenvat credit to the buyers. A first stage dealer is required to enter only cenvatable items in his records and cannot be compelled to record the goods, in which he may be trading Appeal rejected Decided against the Revenue. Clandestine Removal - Cenvatable goods involving modvat credit of Rs. 1,24,484/- were found short Held that - Hon ble Tribunal upheld the denial of modvat credit of Rs. 1,24,484/- as the goods were removed clandestinely Decided in favor of Assessee.

Summary

Issues:
1. Confiscation of seized goods and imposition of penalty.
2. Denial of modvat credit.
3. Allegation of clandestine removal of goods.
4. Interpretation of rules regarding confiscation and penalty.
5. Recordkeeping obligations of a first stage dealer.

Confiscation of Seized Goods and Imposition of Penalty:
The case involved the seizure of excess goods during a visit to the respondent's premises by excise officers. Subsequently, proceedings were initiated, leading to an order by the Additional Commissioner for confiscation of excess goods, redemption fine, and penalty. Upon appeal, the Commissioner (Appeals) set aside the confiscation and penalty but upheld the denial of modvat credit. The appellate tribunal upheld the decision of the Commissioner (Appeals) stating that since there was no evidence of clandestine removal and the goods were not recorded in the dealer's records, confiscation and penalty were not justified.

Denial of Modvat Credit:
The dispute centered around the denial of modvat credit amounting to Rs. 1,24,484/- for short-found goods. The Commissioner (Appeals) upheld this denial, which was the subject of the Revenue's appeal. The tribunal affirmed the decision, emphasizing that the dealer, being a first stage dealer, was not obliged to record non-cenvatable goods in their records. As the dealer was not passing on the modvat credit to buyers and had not claimed credit for the goods, the denial of modvat credit was deemed appropriate.

Allegation of Clandestine Removal of Goods:
The Commissioner (Appeals) found that the confiscation of goods was based on the statement of an individual without corroborative evidence. The tribunal concurred, stating that there was no proof of clandestine removal and that the dealer's status as a first stage dealer, not a manufacturer, was crucial. The tribunal highlighted that the dealer had not taken or passed on credit for the seized goods, further supporting the rejection of the allegation of clandestine activities.

Interpretation of Rules Regarding Confiscation and Penalty:
The tribunal analyzed the rules pertaining to confiscation and penalty under the Act. It was observed that since confiscation was deemed unsustainable, no contravention of the Act could be attributed to the dealer, leading to the conclusion that no penalty could be imposed. The decision was based on the lack of evidence supporting the allegations and the dealer's compliance with the relevant provisions.

Recordkeeping Obligations of a First Stage Dealer:
The tribunal emphasized the recordkeeping obligations of a first stage dealer, noting that only cenvatable items needed to be recorded. The dealer's failure to record non-cenvatable goods, in which they were trading, was not a valid basis for confiscation or penalty. The tribunal upheld the Commissioner (Appeals) decision, highlighting that without the dealer claiming credit for the goods, non-entry in records did not warrant adverse actions. Consequently, the Revenue's appeal was rejected.

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