2019 (2) TMI 847 - AT - Central Excise

Quantum of redemption fine and penalty - removal of electric fans from factory to godown without payment of duty - contravention under Rule 25 Clause (c) and (d) of CER - Held that - Removal from the factory to its godown is not an act of fraud, collusion, suppression etc. to evade payment of duty since, had it been sold to third parties, the same would have amounted to an act against the Government scheme. Even the Revenue has not made out any case that the goods so removed as above have been found to be diverted and thereafter to be sold elsewhere. Thus, the only infraction of removal of goods without prior permission, is only a procedural lapse, which cannot take the characteristic of clandestine removal with intent to evade duty especially, when the goods are otherwise non-marketable. The procedural breach would be best served by limiting the redemption fine to ₹ 50,000/- as well as penalty to ₹ 50,000/- - appeal allowed in part.

Summary

Issues:
1. Alleged clearance of electric table fans without payment of excise duty and storage without proper permission.
2. Confiscation of goods, imposition of fine and penalty.
3. Appeal against Order-in-Original and Order-in-Appeal.

Analysis:
1. The appellant, a manufacturer of electric table fans and domestic electric food mixers for exclusive supply to the Tamilnadu Government under a Rate Contract, faced a Show Cause Notice (SCN) for allegedly clearing electric table fans without paying excise duty and storing them in a rented godown without proper permission. The appellant contended that the goods were not marketable as they were manufactured for the government's distribution scheme, and the removal to the godown was due to space constraints. The appellant agreed to pay the demanded excise duty and offer a bank guarantee.

2. The adjudicating authority, in its Order-in-Original, ordered the confiscation of the electric table fans with an option for redemption by paying a fine, imposed penalties for contravention, and appropriated the bank guarantee. The appellant's appeal to the first appellate authority was rejected, leading to the current appeal. The appellate tribunal considered the contentions of both parties, reviewed the documents, and analyzed the situation.

3. The key question was whether the redemption fine and penalty imposed were justified. The tribunal noted that the goods were specifically manufactured for the government scheme, had no marketability outside the scheme, and were not diverted for sale elsewhere. The removal without permission was seen as a procedural lapse rather than an act to evade duty. The tribunal, without questioning the demand's legality, reduced the redemption fine and penalty to ?50,000 each, citing that justice for a procedural breach would be served by this reduction.

4. The appeal was allowed, reducing both the redemption fine and penalty to ?50,000 each. The tribunal pronounced the order in open court on 25.01.2019.