2002 (2) TMI 892 - AT - Central Excise

Tribunal allows redemption of excess goods with redemption fine, finding no duty evasion or fault.

The tribunal allowed the appellant to redeem excess goods upon payment of a redemption fine, noting they were support structure base manufactured for ... Confiscation of goods with option of redemption fine - entry in RG-1 records - manufacture on behalf of customer / job-work contract - completion of manufacturing process (painting and testing) as condition for entry - permission to enter goods in RG-1 at time of removal - stacking of goods outside factory premises - absence of mens rea to evade duty - superintendent's prior knowledge and failure to advise against contraventionEntry in RG-1 records - completion of manufacturing process (painting and testing) as condition for entry - manufacture on behalf of customer / job-work contract - absence of mens rea to evade duty - Whether confiscation and imposition of redemption fine was justified for goods not entered in RG-1 where the goods were yet to undergo painting and testing and were manufactured on behalf of the customer with permission to enter at removal. - HELD THAT: - The Tribunal accepted that painting and testing were part of the purchase order and that the goods were manufactured on behalf of the customer. The Assistant Commissioner's observation that the goods could be marketed without painting and testing did not override the contractual requirement that painting and testing were requisite steps before the goods were complete. The appellants had obtained permission to make the RG-1 entry at the time of clearance. In these circumstances the non-entry in RG-1 did not demonstrate an intention to evade duty. The confiscation with a redemption fine was therefore not justified.Confiscation and redemption fine set aside in respect of non-entered goods; non-entry did not establish intent to evade duty.Stacking of goods outside factory premises - superintendent's prior knowledge and failure to advise against contravention - confiscation of goods with option of redemption fine - Whether confiscation was justified because goods were found stacked outside the factory premises despite the appellants having informed the superintendent in advance. - HELD THAT: - The Tribunal found that, although stacking goods outside the factory boundary violated central excise provisions, the appellants had in October 1995 informed their superintendent about use of the area outside the factory for stacking. The superintendent, when approached prior to the officers' visit, did not advise against such stacking. Given the superintendent's prior knowledge and lack of adverse instruction, the appellants could not be held blameworthy of a deliberate contravention warranting confiscation. Consequently the confiscation order could not be sustained on that ground.Confiscation set aside in respect of goods found outside the factory premises; prior intimation to and inaction by the superintendent precluded fault by the appellants.Final Conclusion: The impugned order of confiscation with an option to redeem was set aside; appeal allowed and consequential relief granted, since the goods were contractually incomplete (painting and testing pending) and entry in RG-1 was permitted at removal, and prior intimation to the superintendent about external stacking precluded culpability for the contravention. Issues: Confiscation of excess goods, non-entry in RG-1 records, goods found outside factory premisesConfiscation of Excess Goods:The judgment addresses the confiscation of excess goods by the authorities below, allowing the appellant to redeem them on payment of a redemption fine. The appellant argues that the goods in question were support structure base, manufactured on behalf of another company as per a purchase order. The goods were not entered in RG-1 records as painting and testing were pending, per the purchase order requirements. The appellant sought permission to enter the goods in RG-1 records upon clearance, which was granted. The judgment notes that the Asst. Commr. did not dispute the need for painting and testing, as per the contract terms. The tribunal finds that the entry in RG-1 was not an attempt to evade duty, given the circumstances, and rules in favor of the appellant.Non-Entry in RG-1 Records:The appellant's advocate argues that the goods were not entered in RG-1 records due to pending painting and testing, as required by the purchase order. Permission was obtained to enter the goods in RG-1 records upon clearance. The tribunal observes that the goods were not yet painted and tested, as acknowledged by the authorities. The contract terms between the appellant and the customer mandated painting and testing, justifying the delay in entry. The tribunal rules that the delay in entry was not an evasion of duty, leading to the appeal being allowed.Goods Found Outside Factory Premises:Regarding the goods found outside the factory premises, the appellant had informed the superintendent about using the area for stacking materials before the visit by officers. Although stacking goods outside violated excise laws, the superintendent did not advise against it when informed earlier. The tribunal finds that the appellant cannot be faulted for the violation due to the lack of objection from the jurisdictional superintendent. Consequently, the impugned order is set aside, and the appeal is allowed with relief for the appellants.