2016 (8) TMI 621 - AT - Central Excise

Confiscation in lieu of redemption fine and imposition of penalty - Rule 25 of the Central Excise Rules, 2002 - Seizure of branded, packed automobile parts - appellants were buying various auto parts from different places, affixed their brand and MRP, after packing these parts and thereafter sold in the market - neither registered with the Department nor were discharging Central Excise duty on these items. Held that - the admitted facts of the case are that the appellants are liable for Central Excise duty on the repacked auto components cleared by them. Goods seized by the officers were of such nature in packed condition with MRP and are as such liable for Central Excise duty. This is not being contested. Regarding raw materials valued, I find that the provisions of Rule 25 will not apply. There is no reference to the in process material or raw material in the said provision. As held by the Tribunal in Anchal Prints Pvt. Ltd. vs. CCE, Surat I 2007 (10) TMI 532 - CESTAT, AHMEDABAD the seizure and confiscation of such goods are not sustainable. Quantum of fine and penalty - Immediately on being pointed out by the Department, they have taken registration and discharged duty liability on clearance of these goods - not fully aware of the application of provisions of deemed manufacture for their products - Held that - the seizure and confiscation of raw materials are held to the untenable and also considering the fact of overall duty liability, the redemption fine imposed can be reduced to ₹ 10 lakhs and the penalty accordingly may be reduced to ₹ 5 lakhs in the facts and circumstance of the case. Cenvat credit - inputs - Held that - this issue has not been the subject matter or proceedings before the Original Authority. Based on the plea made by the appellant, the Appellate Authority gave a finding regarding inadmissibility of such credit as the appellants were not registered with the Department at the time of detection of the case. I find that the Tribunal has held that credit may be available even in case of unregistered unit Well Known Polyesters Ltd. vs. CCE, Vapi 2011 (1) TMI 664 - CESTAT, AHMEDABAD . The entitlement of appellant for the credit will be subject to verification of documents and the applicable provisions of law. - Appeal disposed of

Summary

Issues:
1. Liability of excise duty on repacked auto components
2. Seizure and confiscation of raw materials
3. Quantum of redemption fine and penalty
4. Claim for Cenvat credit on inputs

Liability of excise duty on repacked auto components:
The case involved the appellants engaged in repacking auto parts with their brand and MRP, subsequently selling them in the market. The issue was whether the repacked items were liable for excise duty as the process of packing amounted to manufacture. The Original Authority ordered confiscation of goods valued at ?1,00,23,329, with a redemption fine of ?15 lakhs and a penalty of ?10 lakhs. The Commissioner (Appeals) upheld this order. The Tribunal found the appellants liable for excise duty on the repacked auto components, as they were in a packed condition with MRP, making them dutiable. However, the Tribunal reduced the redemption fine to ?10 lakhs and the penalty to ?5 lakhs due to lack of reasoning for the initial quantification.

Seizure and confiscation of raw materials:
The appellants contested the seizure and confiscation of raw materials valued at ?4,00,240, arguing that Rule 25 did not apply to such goods. Citing a previous decision, the Tribunal agreed that the provisions of Rule 25 did not cover in-process or raw materials. Therefore, the seizure and confiscation of the raw materials were deemed unsustainable, and the Tribunal set aside this aspect of the case.

Quantum of redemption fine and penalty:
The appellants challenged the proportionality of the redemption fine and penalty imposed, arguing that they were excessive compared to the duty involved. The Tribunal noted the lack of reasoning for the initial quantification and reduced the redemption fine to ?10 lakhs and the penalty to ?5 lakhs, considering the untenability of the seizure and confiscation of raw materials and the overall duty liability.

Claim for Cenvat credit on inputs:
The appellants sought Cenvat credit on inputs, which was rejected by the impugned order due to their unregistered status at the time of the case detection. The Tribunal referred to a previous case where credit was allowed to an unregistered unit. It held that the appellant's entitlement to the credit would be subject to verification of documents and applicable legal provisions, indicating a possibility for credit availability even for unregistered units.

In conclusion, the Tribunal disposed of the appeal by setting aside the seizure and confiscation of raw materials, reducing the redemption fine and penalty, and leaving the possibility open for the appellant to claim Cenvat credit on inputs subject to verification.