2019 (10) TMI 1143 - AT - Central Excise

Clandestine removal - non-accountal of excess goods found - cross-examination not carried out - HELD THAT - Admittedly the goods were lying in the factory and subsequently recorded in the RG-1 register. Therefore, for any goods lying in factory, duty demand does not arise. Non-accounting and consequent confiscation of excess stock found during visit of the officers - HELD THAT - Both, Shri Santosh Shrivastav, Production Manager and Shri Rajiv Thadani, Director of appellant Company in their respective statements recorded under Section 14, stated that non-accountal of excess found goods is due to technical snag in the computer software and for this reason, production record could not be generated for the period 01 January 2014 to 06 January 2014 and because of this reason, RG-1 register could not be updated. Admittedly, there is no investigation by the Revenue on these categorical statements given by the appellant s employees and no evidence has been brought on record that non-accounting of finished goods is with intention to clear the goods clandestinely for evasion of duty. There is no evidence of attempt to clear the goods clandestinely but there is contravention of the provisions inasmuch as the appellant have not recorded the excisable goods in the statutory record - Duty demand is set-aside. However, the duty liability arise as and when the goods are cleared from the factory. Confiscation of goods and consequent redemption fine are also set-aside - Penalty imposed under Rule 25 of Central Excise Rules, 2002 is reduced - penalty imposed on Shri Rajiv Thadani is set-aside - Appeal allowed in part.

Summary

Issues:
1. Duty demand on excess stock found during a departmental visit.
2. Confiscation of goods and imposition of penalties under Central Excise Rules, 2002.
3. Appeal against the orders passed by the Commissioner (Appeals) regarding penalty imposition.

Analysis:
1. The case involved a duty demand on excess stock found during a departmental visit to a manufacturing unit. The departmental officers discovered finished goods in excess of the recorded stock in the RG-1 register. A show cause notice was issued proposing a duty demand, confiscation of goods, and penalties under Rule 25 of Central Excise Rules, 2002. The Adjudicating Authority confirmed the duty demand, ordered for confiscation of goods, and imposed penalties on the concerned individuals. The appellant challenged this order.

2. The appellant argued that the non-accounting of excess stock was due to a technical snag in the computer software, which prevented the generation of production records and updating of the RG-1 register. The appellant contended that there was no evidence to prove an intention to evade duty by not accounting for the goods. The appellant cited relevant judgments to support their case. The Revenue, on the other hand, supported the findings of the Commissioner (Appeals) and relied on a specific judgment to justify the confiscation of goods.

3. After considering the arguments and evidence presented by both sides, the Member (Judicial) analyzed the situation. It was noted that the goods were eventually recorded in the RG-1 register, indicating no attempt to clear them clandestinely. The statements of the appellant's employees regarding the technical snag were accepted, and it was observed that there was no investigation by the Revenue to refute these claims. The Member distinguished a cited judgment where intentional non-maintenance of records was admitted. Consequently, the duty demand was set aside, and the confiscation of goods and penalties were also annulled or reduced based on the findings.

4. The Member held that while there was a contravention of provisions due to the lack of accounting in statutory records, there was no evidence of an attempt to clear goods clandestinely. The duty liability was acknowledged to arise upon clearance of goods from the factory. The penalties imposed were modified or set aside based on the circumstances and observations made during the proceedings. The appeal of the deceased appellant was abated, and the appeals were disposed of accordingly.