2015 (10) TMI 2141 - AT - Central Excise

Confiscation of goods - Excess stock found which was not recorded in RG-1 Register - foremost contention of the appellant is that the goods confiscated were not finished goods - search was conducted as on 10/3/2011 - Imposition of redemption fine and penalty - Held that - The fact of recovery of unaccounted finished goods and raw material and the fact that the RG-1 Register was updated only till 28/2/2011 together with the fact of recovery of loose papers containing accounts of clearance of finished goods, purchase of raw materials, together with the statements given are sufficient materials to arrive at a prima facie conclusion or reasonable belief that the goods are liable for confiscation. It is also contented that the respondents have not recorded that there is reasonable belief to confiscate the goods. - there was enough material to affirm a prima facie case for confiscation. Shri Deepak Maini in his statement has stated that the officers on the reasonable belief that the excisable goods have been manufactured and stored with an intention to remove the same clandestinely and without payment of duty seized the finished goods as mentioned in Annexure-B. The statement given by Shri Neeraj Khattar is also in similar lines admitting the discovery of unaccounted finished goods and raw material. On such score, the contention of the appellant that there was no reasonable belief for confiscation is unacceptable. The instant case is not a situation where there is mere non-accountal of finished goods. If the finished goods were not accounted in the register, the appellant should be able to give a plausible explanation for such non-accounting. In Pepsi Foods Vs. CCE-Chandigarh, (2001 (11) TMI 118 - CEGAT, NEW DELHI), the non-accountal was sufficiently explained by the assessee. The Tribunal therein observed that Rule 173Q cannot take in an accounting failure simplicitor and held in favour of the assessee. Failure to account goods or raw material may be due to different reasons. There may be instances where the person incharge of accounts is on leave or change of management etc. which may be valid reason for not updating the register. In the present case, the appellant has not been able to give any explanation for not updating the Register. - Further, entries of clearances of finished goods were found in loose papers. From the totality of facts and evidence presented by the case, the intention to evade payment of duty can be safely inferred. Contention of the appellant that there is no intention to evade the payment of duty is not tenable. The judgment rendered in Bhillai Conductors (P) Ltd. (2000 (1) TMI 105 - CEGAT, NEW DELHI) is thus distinguishable on facts. Therefore, I hold that the confiscation of goods and imposition of penalty is sustainable. - However, redemption fine and penalty is reduced - Decided partly in favour of assessee.

Summary

Issues Involved:
1. Confiscation of finished goods.
2. Imposition of penalties under Central Excise Rules, 2002.
3. Reasonable belief for confiscation under Section 110 of the Customs Act, 1962.
4. Applicability of Rule 25 of Central Excise Rules, 2002.
5. Quantum of redemption fine and penalties.

Detailed Analysis:

1. Confiscation of Finished Goods:
The appellant argued that the goods confiscated were not finished goods as they still required processes like painting and buffing. However, the Tribunal found that this contention was not supported by the statements given by the appellant's representatives at the time of the search. The statements did not mention any further processing needed for the goods, leading the Tribunal to conclude that the goods were indeed finished. However, the Tribunal acknowledged that the confiscated goods included rejected items valued at Rs. 23,645/-, which should not have been confiscated.

2. Imposition of Penalties under Central Excise Rules, 2002:
The appellant contended that penalties under Rule 25 could only be imposed for non-accountal of excisable goods with the intent to evade duty. The Tribunal found that the non-accountal of finished goods and raw materials, along with the presence of loose papers indicating unrecorded transactions, suggested an intention to evade duty. Therefore, the imposition of penalties was justified.

3. Reasonable Belief for Confiscation under Section 110 of the Customs Act, 1962:
The appellant argued that there was no reasonable belief for confiscation as required under Section 110 of the Customs Act. The Tribunal held that the recovery of unaccounted goods, the outdated RG-I Register, and the loose papers provided sufficient material for a prima facie reasonable belief that the goods were liable for confiscation. The Tribunal dismissed the appellant's argument that the respondents failed to record this reasonable belief.

4. Applicability of Rule 25 of Central Excise Rules, 2002:
The appellant argued that mere non-accounting of goods without intent to evade duty does not attract Rule 25. The Tribunal referred to the case of Bhillai Conductors (P) Ltd. Vs. CCE-Raipur, which held that mens rea is necessary for confiscation and penalty. However, the Tribunal distinguished this case by noting that the appellant failed to provide a plausible explanation for the non-accountal, and the presence of loose papers indicated an intention to evade duty.

5. Quantum of Redemption Fine and Penalties:
The Tribunal found that the redemption fine and penalties imposed were excessive. Considering the inclusion of rejected goods in the confiscated items, the Tribunal reduced the redemption fine from Rs. 1 lakh to Rs. 40,000/-. The penalty on M/s. Sargodha Enterprises was reduced from Rs. 2,50,000/- to Rs. 1 lakh, and the penalty on Shri Deepak Maini was set aside.

Conclusion:
The Tribunal modified the impugned order as follows:
- Reduced the redemption fine on finished goods to Rs. 40,000/-.
- Reduced the penalty on M/s. Sargodha Enterprises to Rs. 1 lakh.
- Set aside the penalty on Shri Deepak Maini.
The appeal by Shri Deepak Maini was allowed, and the appeal by M/s. Sargodha Enterprises was partly allowed.