2015 (8) TMI 60 - AT - Central Excise

Discrepancy in Finished Goods Register (RG-1) - goods were found in excess of the recorded balance in their RG I register - unfinished / incomplete goods - Confiscation of goods - Imposition of redemption fine - Held that - Findings of the adjudicating authority are at variance with what has been detailed in the said Hand Book. Further the adjudicating authority has not explained in the impugned order as to why the samples were sent to Guru Nanak Dev University (GNDU) Amritsar instead of any other designated authority under the law. It is not brought on the record whether the persons who conducted the test were qualified to conduct the test and that whether their test report was acceptable under law and by what authority of law. It is also not brought on record what tests were carried out by the said person/ persons. It is also not brought out on record how the test report conducted on laundry soaps manufactured by the appellants. Thus the test report relied upon by the adjudicating authority becomes inadmissible under the law. Goods were found excess were not in complete finished condition as these goods were not packed and could not be entered in the statutory records. This fact has not been examined at the time of investigation. Therefore the defence taken by the respondents is acceptable in the absence of corroborative evidence. Therefore I do agree with the finding of the learned Commissioner (Appeals) that goods are not liable for confiscation. Accordingly the proposal of confiscation of goods is set aside. Consequently penalty redemption fine are not imposable on the respondent. - no efforts were made by the revenue to reveal the truth by examining the manufacturing process to ascertain the raw material consumed and resulted output. Therefore I hold that charge of clandestinely removal of goods is also not sustainable against the respondent in the absence of any contrary evidence against the respondent. - No infirmity in the impugned order the same is upheld - Decided against Revenue.

Summary

Issues Involved:
1. Whether the goods found in excess at the time of investigation are liable for confiscation.
2. Whether the shortage of raw material found during the course of investigation and the subsequent allegation of clandestine procurement, manufacturing, and clearance of finished goods without payment of duty is proved by the department.

Detailed Analysis:

Issue 1: Confiscation of Excess Goods
The adjudicating authority initially confiscated goods valued at Rs. 60,99,718/- found in the factory premises, observing that the excess stock of finished goods was liable for confiscation under Rule 25 of the Central Excise Rules, 2002. The Commissioner (Appeals) reduced the redemption fine and penalty, leading to the Revenue's appeal.

The appellate tribunal examined whether the goods lying in the factory premises were liable to be confiscated. Rule 25(b) of the Central Excise Rules, 2002, states that goods can be confiscated if the manufacturer does not account for any excisable goods produced or stored. The term "account for" was discussed in the case of Pepsi Foods vs. CCE, where it was clarified that the rule relates to explaining the correct position of excisable goods, not merely accounting failures.

The tribunal found that the adjudicating authority did not establish whether the goods were fully finished and ready to be entered into records. Since the goods were not fully finished, their entry in the records was not mandatory, and thus, the confiscation was not justified. The tribunal upheld the Commissioner (Appeals) decision, setting aside the proposal for confiscation and the associated penalties.

Issue 2: Allegation of Clandestine Procurement and Removal
The adjudicating authority relied on miscellaneous papers and statements from buyers to allege that the appellants had removed excisable goods without payment of duty. The Commissioner (Appeals) found that the evidence was insufficient to prove clandestine removal. The tribunal noted that the statements from buyers did not specify the quantity, dates, or value of goods received without duty, making it impossible to quantify the alleged clandestine removal.

The adjudicating authority also based its findings on the titre value of oils used in soap manufacturing, suggesting that the appellants used non-dutiable oils. However, the tribunal found that the adjudicating authority did not provide adequate evidence, such as qualified test reports or expert opinions, to support this claim. Additionally, the adjudicating authority failed to explain how 1200 kg of soap could be produced from 840 kg of raw materials, relying solely on a partner's statement without corroborative evidence.

The tribunal concluded that the charge of clandestine removal was not sustainable due to the lack of concrete evidence regarding the manufacturing process, raw material consumption, and the actual removal of goods. The tribunal upheld the Commissioner (Appeals) decision, dismissing the Revenue's appeal.

Conclusion
The tribunal found no infirmity in the Commissioner (Appeals) order and upheld it, dismissing the Revenue's appeals. The tribunal concluded that the goods found in excess were not liable for confiscation, and the charge of clandestine removal of goods was not proven by the department.