2018 (3) TMI 599 - AT - Central Excise

Clandestine removal - excess stock - confiscation - Held that - It is seen that the excess quantum of finished goods that was sought to be subject to duty had already borne the burden of duty at the time of provisional release. Subsequent confiscation, and redemption thereof on such high fine, is not warranted in these circumstances. The excess stock was ordered to be confiscated under rule 25 of the Central Excise Rules, 2004 without identifying the specific charge leading to the confiscation. Admittedly, two of the returns, namely, for June 2015 and October 2015 had not been filed on time. The pendency of dispute does not in any way affect the responsibility of complying with the provisions of Central Excise Rules once the registration has been obtained. Having failed to do so, the penal consequences must follow - penalty for late filing of returns is reduced to ₹ 40,000/-. Appeal allowed in part.

Summary

Issues:
1. Liability to pay excise duty on manufacturing activity.
2. Confiscation of excess stock and imposition of penalties.
3. Interpretation of order under section 35F of the Central Excise Act, 1944.
4. Imposition of redemption fine and penalties for late filing of returns.

Analysis:

Issue 1: Liability to pay excise duty on manufacturing activity
The appellant, M/s Maruti Fertochem Limited, claimed that their business involved the procurement of primary fertilizers, which were then treated to create usable fertilizer. They argued that their activity did not constitute manufacturing and resisted registration. However, a case was initiated against them for liability to pay duty, which was pending before the Tribunal. The appellant had obtained a stay in the dispute, which the Revenue perceived as a waiver of pre-deposit rather than a stay of operation. This misunderstanding led to the confiscation of goods and imposition of penalties. The first appellate authority set aside the confiscation of excess raw materials and penalties for failure to register.

Issue 2: Confiscation of excess stock and imposition of penalties
The excessive stock, which had already borne duty at the time of provisional release, was confiscated without specifying the grounds for confiscation. The Tribunal found the confiscation invalid due to the lack of specific charges. Consequently, the redemption fine was set aside. Regarding the late filing of returns, penalties were imposed for two quarters, but the penalty for the period before registration was deemed unnecessary. Thus, the penalty for late filing of returns was reduced to &8377; 40,000.

Issue 3: Interpretation of order under section 35F of the Central Excise Act, 1944
The appellant argued that the forced registration was a result of an incorrect interpretation of the order under section 35F of the Central Excise Act, 1944. They contended that the redemption fine imposed was excessive, considering the goods had already borne duty at the time of release. The appellant also disputed the allegation of late filing of returns, citing the delay in compliance due to the recent registration.

Issue 4: Imposition of redemption fine and penalties for late filing of returns
The Tribunal observed that the confiscation and redemption of goods with high fines were unwarranted since the excess stock had already paid duty. The lack of specific charges for confiscation rendered the action invalid. The penalty for late filing of returns was considered justified, but the penalty for the period before registration was deemed unnecessary. As a result, the impugned order was modified to set aside the confiscation and redemption fine, reducing the penalty for late filing of returns to &8377; 40,000.