Clandestine removal - imposition of penalty u/Rule 25 of CER

PJ/Case Laws/2011-12/1409

Case: Commissioner of Central Excise, Aurangabad v/s M/s GaL Aluminium Extrusions Pvt Ltd

Citation: 2011-TIOL-1449-CESTAT-MUM

Issue:- Excess raw material found but no hint of clandestine removal– whether penalty under Rule 25 of the CER, 2002 imposable?

Brief fact:- Respondents are engaged in the manufacture of aliuminium extrusion profiles falling under Chapter 76. They also availed Cenvat credit on input services. During physical stock verification at their factory premises, 3.067 MTs of finished goods were found in excess than the book stock. In the next visit, excess raw materials were found than declared stock. The excess finished goods and raw materials were seized on the ground that they were not maintaining the record properly.

The Adjudicating Authority ordered confiscation of seized finished goods which were allowed to be redeemed by paying redemption fine and penalty of equal amount was imposed under Rule 25 and penalties of Rs. 5000/- each under Rule 27 and Rule 15 A.

In appeal, the Commissioner (Appeals) set aside the impugned order except for imposing penalties under Rule 27 of CER, 2002 and Rule 15A of CCR, 2004. Against this decision, Revenue is in appeal.

Appellant’s Contentions:- Revenue contended that the Commissioner (Appeal) had not appreciated the excess of finished goods and raw materials in the factory of the respondent. The said stock would have been cleared without payment of duty if the Excise officers had not checked the physical stock. Reliance was placed on judgment in the case of Commissioner of Customs, Madras v/s D. Bhoormull [1983 (13) ELT 1546 (SC).

Respondent’s Contentions:- The respondent contended that the Commissioner (Appeals) had recorded clear findings. In case of finished goods, even if the goods which were not recorded the goods were less than a day’s production capacity and secondly the raw materials were not liable to confiscation under Rule 25. It was fairly conceded that the respondent are not liable for confiscation. Reliance was placed on M/s Surya Narayan Silk Mills Pvt Ltd v/s Commissioner of Central Excise, Surat [2009 (234) ELT 189 (Tri-Ahmd)]. It was also submitted that raw material is not liable for confiscation as held in the case of M/s Anchal Prints Pvt Ltd v/s Commissioner of Central Excise [2009 (244) ELT 106 (Tri-Del)].

Reasoning of Judgment:- The Tribunal held that although excess stock of raw material and finished goods was found, the Department has not shown that attempt was made for clandestine removal of these goods. Rule 25 provides for confiscation of finished goods, and it is not applicable to raw materials. The excess finished goods was less than one day’s production of the respondent. The fact that excess stock was lying in finished goods stock room does not mean that the same were meant for clandestine removal and were liable for confiscation under Rule 25. Provisions of Rule 25 were subject to the provisions of Section 11AC of the Central Excise Act, 1944 and allegation of clandestine removal is not made.

With regard to raw materials, reliance was placed on Anchal Prints case wherein it was held that Rule 25 is applicable in the case of excisable goods and not in the case of raw materials. It was held that Revenue has not proved the case of clandestine removal against the respondent. It was held that case of D. Bhoormull was not applicable to the case.

Decision:- Appeal dismissed.

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PJ/Case Laws/2011-12/1409

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