2023 (10) TMI 384 - AT - Central Excise

Clandestine production and removal - excesses and shortages in stock - entire case is based on the records maintained by the appellant - invocation of principle of administrative inconvenience - HELD THAT - The observations made in the impugned order to effect that the appellants were not maintaining the record is contrary as the entire case of the department is based on the Book Balance in the book of accounts and physical stock found at the time of visit. Further department itself has resumed these documents as seen by the Annexure attached - Thus the decisions relied upon by the Commissioner (Appeal) in ISATYABRAT SWAIN, M/S. SURYA POLYPACK PVT. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE MEERUT I 2014 (10) TMI 559 - CESTAT NEW DELHI (LB) for invoking the concept of administrative inconvenience etc., would not apply to the present case, where it was held that Similarly, in the case of INDIAN ALUMINIUM COMPANY LTD. VERSUS THANE MUNICIPAL CORPORATION 1991 (9) TMI 162 - SUPREME COURT it was observed that non-observance o f even a procedural condition not to be condoned if likely to facilitate commission of fraud and introduce administrative inconveniences. Admittedly, if the condition is so important that non-observance of the same may result in fraudulent activity, such condition cannot held to be an empty formality. In any case when the entire case is based on the records maintained by the appellant, there are no justification in such observations which have been reproduced by the Commissioner (Appeal) in routine and stereotype manner without even examining even the panchnama. The quantum of excess and shortages determined by the exercise of stock taking is negligible in all cases except for the scrap. The stock taking errors and the weighing scale errors etc could have accounted for the shortages and excesses. The decision relied upon in the impugned order, the will not support the case of department without any explicit and conclusive evidence in respect of the clandestine clearance being alleged. Further the goods which were still in the factory premises of the appellant have not been cleared. Hence there cannot be any charge of clandestine clearance made against the appellant in respect of these goods. Officers could have asked the appellants to rectify their book balance and got them tallied with the physical stock determined by them. Similar view has been expressed in case of KOCH RAJES CD. INDUSTRIES PVT. LTD. VERSUS COMMISSIONER OF C. EX., MUMBAI-IV 2005 (7) TMI 248 - CESTAT, MUMBAI . Demand made in respect of shortages which are in range from 0.3 kgs to 23.60 kgs cannot be justified, without any evidence of any clandestine clearance or without any investigation also being made in this respect. There are no merits in the impugned order, which in any case is completely vague as having failed to consider any of the issues that are involved in the matter and has gone on only to invoke the principle of administrative inconvenience , without even establishing the relevance of the same. Appeal allowed.

Summary

Issues Involved:
1. Confiscation of finished goods and imposition of redemption fine.
2. Demand of duty on shortages of finished goods.
3. Imposition of interest on the duty demanded.
4. Imposition of penalty on the appellant.
5. Confiscation of the vehicle and imposition of redemption fine.
6. Imposition of penalty on the transporter.

Summary:

1. Confiscation of Finished Goods and Imposition of Redemption Fine:
The Commissioner (Appeal) upheld the confiscation of finished goods valued at Rs. 25,85,613/- under Rule 25 of the Central Excise Rules, 2002, with a redemption fine of Rs. 5,20,000/-. The appellant argued that the excess stock was due to eye estimation errors and that the goods were still in the factory premises, not cleared. The Tribunal found that mere non-entry in RG-1 does not warrant confiscation if goods are within factory premises and no evidence of clandestine removal exists. The Tribunal cited several precedents supporting this view.

2. Demand of Duty on Shortages of Finished Goods:
The Commissioner (Appeal) confirmed a demand of Rs. 5,263/- for shortages of finished goods. The appellant contended that the shortage was due to human error in stock verification. The Tribunal noted that the shortages were minimal and could be attributed to stock-taking errors. Without evidence of clandestine removal, such demands are unjustified.

3. Imposition of Interest on the Duty Demanded:
Interest on the duty of Rs. 5,263/- was confirmed under Section 11AA of the Central Excise Act, 1944. The Tribunal, considering the minimal shortages and lack of evidence for clandestine removal, found the demand for interest to be unjustified.

4. Imposition of Penalty on the Appellant:
A penalty of Rs. 3,28,465/- was imposed under Rule 25 of the Central Excise Rules, 2002, read with Section 11AC of the Central Excise Act, 1944. The Tribunal found that penalties are not warranted without evidence of intent to evade duty or clandestine removal, especially when goods are within the factory premises.

5. Confiscation of the Vehicle and Imposition of Redemption Fine:
The vehicle found carrying goods was confiscated with a redemption fine of Rs. 20,000/-. The appellant argued that the vehicle was still within the factory premises awaiting proper documentation. The Tribunal held that confiscation is not justified when the vehicle has not moved out of the premises and no evidence of intent to evade duty is provided.

6. Imposition of Penalty on the Transporter:
A penalty of Rs. 5,000/- was imposed on the transporter under Rule 26 of the Central Excise Rules, 2002. The Tribunal found no justification for the penalty as the vehicle had not left the factory premises and there was no evidence of clandestine removal.

Conclusion:
The Tribunal allowed the appeal, setting aside the impugned order, and ruled that the confiscation, demand of duty, interest, and penalties were unjustified due to lack of evidence for clandestine removal and the goods being within the factory premises.