2014 (7) TMI 274 - AT - Central Excise

Duty demand - Non-account of goods in RG-1 - excess quantity found during physical verification - weighment was not done - Confiscation of goods - Penalty - Assessee contends that when their factory was visited by the officers on 19.7.09, there was already a break down in the factory due to fault in the transformers which fact is not being disputed by the Revenue - Held that - In the absence of inventory, it is neither possible nor practical to weigh such huge quantum of final product. As such, there is every possibility of occurrence of an error in the physical verification of stock. Otherwise, there is virtually no evidence on record that such excess stock was not entered in the records with any malafide to clear the same without payment of duty. There is no inculpatory statement of any authorised representative of the appellant. - In the absence of any evidence to that effect, as per declaration of law by various decisions of the Tribunal, confiscation of excess found goods is neither justified nor warranted - Reference can be made to majority decisions in the case of Bhillai Conductors (P) Ltd. vs. CCE, Raipur 2000 (1) TMI 105 - CEGAT, NEW DELHI as also to Tribunal s decision in the case of A Kumar industries vs. CCE Daman, Vapi 2009 (7) TMI 1126 - CESTAT AHMEDABAD - simple failure of non-accounting of goods in the RG 1 register do not invite confiscation of the same or imposition of penalty unless there is evidence to show that goods were meant for clandestine removal - Decided in favour of assessee.

Summary

Issues:
1. Confiscation of excess found goods with redemption fine and penalty imposed.
2. Dispute regarding physical verification process and lack of evidence for malafide intent.
3. Appellant's objection to recording of panchnama during stock verification.
4. Application of legal principles regarding confiscation of goods without evidence of malafide intent.

Analysis:
1. The judgment involves two appeals arising from separate orders passed by the Commissioner (Appeals) concerning the confiscation of excess found goods during visits to the appellant's factory by Central Excise officers. The first appeal (E/2646/2011-Ex(SM)) relates to the discovery of 103.48 MT of MS ingots valued at &8377; 21,31,688, while the second appeal involves 54.562 MT of ingots valued at &8377; 10,91,240. The lower authorities ordered confiscation, redemption fine, and penalty in both cases.

2. The main defense raised by the appellant was the occurrence of a breakdown in the factory during the initial visit, leading to discrepancies in the physical stock taking process. The appellant argued that the verification was based on eye estimation without proper investigation, and there were inconsistencies in the documentation and witness accounts. The appellant denied any malafide intent or clandestine removal of the excess goods.

3. The appellant contested the recording of panchnama during the stock verification, claiming it was impractical to weigh the goods without creating an inventory due to the substantial stock of ingots in the factory. The absence of a detailed inventory raised concerns about the accuracy of the physical verification process, highlighting the potential for errors.

4. The presiding judge, in line with established legal precedents, emphasized the necessity of evidence demonstrating malafide intent for confiscation of excess goods. Citing previous tribunal decisions, including the cases of Bhillai Conductors (P) Ltd. vs. CCE, Raipur and A Kumar Industries vs. CCE Daman, Vapi, the judge concluded that mere non-accounting of goods in the register does not warrant confiscation or penalties without proof of clandestine activities. As a result, the impugned orders were set aside, and both appeals were allowed in favor of the appellants.