2016 (12) TMI 1381 - AT - Central Excise

End use of product - polyester texturised yarn - 100% EOU - goods detained on the belief that the same were diverted to open market instead of being sent to M/s RTPL, a 100% EOU for its use - whether confiscation of the goods seized by the Department and imposition of penalty on the Appellant are proper or otherwise? - Held that - even though the goods were cleared against AR-3As, but instead of its further use by M/s RTPL, diverted on its way - the Appellants are required to pay the duty involved - it is not necessary always to prove mens rea on the part of the Appellant, also the Appellant has not disputed their liability of duty on the goods cleared by them from the factory against AR-3As which ultimately had not reached the destination, where these goods were to be used by M/s RTPL, In these circumstances, there is contravention of the provisions of the Central Excise Act and rules made there under - confiscation and penalty directed under Rule 9(2) read with Rule 209(1) of erstwhile Central Excise Rules 1944, are sustainable. However, the redemption fine and penalty imposed are excessive under the circumstances of the case. Consequently, considering the fact that the Appellant is a registered unit, the appropriation of entire Bank Guarantee amounting to ₹ 4,10,799/- on confiscation of goods is modified by reducing the fine to ₹ 1.00/- and penalty to ₹ 4.00 lakhs to meet the ends of justice - Further nothing has been brought on record by the Revenue to show that the Appellant is a habitual offender, warranting harsh action of confiscation of plants and machinery, confiscation of plants and machinery is set aside. Appeal allowed - decided partly in favor of appellant.

Summary

Issues:
1. Confiscation of goods seized by the Department
2. Imposition of penalty on the Appellant

Detailed Analysis:
1. The appeal was filed against an order passed by the Commissioner, C.Ex. & S.Tax, Surat, regarding the seizure of consignments of polyester texturised yarn (PTY) by the Department. The Appellants, a 100% EOU, had cleared the goods for supply to another EOU but were intercepted by the Department on suspicion of diversion to the open market. The Show Cause Notice proposed confiscation of seized goods, recovery of excise duty, customs duty, interest, and penalty. The Appellants challenged the order, focusing on confiscation of goods, penalty, and confiscation of plants and machinery under the Central Excise Act and Rules. The Appellant's advocate argued that the diversion was not intentional, no corroborative evidence was presented, and the statements implicating the Appellant were uncorroborated. Citing relevant case laws, the advocate contended that the confiscation and penalty were unsustainable.

2. The Authorized Representative for the Revenue defended the findings, stating that there was sufficient evidence of the Appellant's awareness of the diversion, justifying the penalty and confiscation. The goods were cleared without duty payment for use in another EOU but were diverted to the local market, contravening the Central Excise Act. After hearing both sides, the main issue was whether the confiscation and penalty were justified. The Tribunal noted that while the goods were cleared with proper documents, they were diverted en route. The Revenue argued that duty payment was required as the goods did not reach the intended destination. The Tribunal agreed with the Revenue, stating that contravention of the Act and rules warranted confiscation and penalty, even without proving mens rea. However, the Tribunal found the redemption fine and penalty excessive, reducing them to ensure justice. The confiscation of plants and machinery was set aside due to lack of evidence of habitual offense.

In conclusion, the Tribunal partially allowed the appeal by modifying the redemption fine, penalty, and setting aside the confiscation of plants and machinery, emphasizing the importance of upholding the law while ensuring fairness and proportionality in penalties imposed.