2005 (5) TMI 411 - AT - Central Excise

Tribunal overturns duty demand and penalty due to lack of evidence, upholds confiscation of unexplained goods.

The Tribunal set aside the demand of duty and penalty due to lack of substantial evidence linking the appellants to clandestine removal of goods based ... Clandestine removal - Proof - Private record - Accountal of goods Issues:1. Demand of duty based on private records of a broker.2. Confiscation of seized cotton yarn.3. Quantum of penalty reduction.4. Excess unaccounted stock of finished goods.5. Evidence of clandestine removal of goods.6. Non-accountal of unaccounted stock in factory.7. Validity of redemption fine.Analysis:1. Demand of Duty based on Private Records:The demand of duty was challenged as being solely based on the private records of a broker, without substantial evidence of clandestine removal of goods. The Tribunal noted the lack of concrete evidence linking the alleged clandestine removal to the appellants, as the intermediary broker was not traced, and investigations were incomplete. Consequently, the demand of duty was deemed unsustainable, leading to the setting aside of duty demand and penalty.2. Confiscation of Seized Cotton Yarn:Regarding the confiscation of the seized cotton yarn, the Tribunal found that the appellants failed to provide a valid explanation for the unaccounted stock of yarn in their factory. Despite the belated explanation regarding production on specific dates, the Tribunal upheld the confiscation as the non-accountal of goods was undisputed. The redemption fine imposed in lieu of confiscation was considered reasonable, leading to the affirmation of confiscation and redemption.3. Quantum of Penalty Reduction:The Tribunal addressed the reduction of the penalty imposed on the appellants by the Commissioner (Appeals). The penalty was linked to the alleged clandestine removal of goods, which was found to lack sufficient evidence. As the finding of clandestine removal was rejected, the Tribunal concluded that there was no basis for imposing a penalty on the appellants, resulting in the setting aside of the penalty.4. Excess Unaccounted Stock of Finished Goods:The Tribunal referenced previous cases where excess unaccounted stock of finished goods led to confiscation, emphasizing the importance of accurate stock maintenance and accountability. This principle was applied to the case at hand, supporting the decision to uphold the confiscation of the unaccounted stock of cotton yarn found in the appellant's factory.5. Evidence of Clandestine Removal of Goods:The Tribunal scrutinized the evidence presented by the department regarding the alleged clandestine removal of 431 bags of cotton yarn. Due to the lack of conclusive evidence linking the appellants to the intermediary broker and the incomplete investigations, the Tribunal concluded that there was insufficient proof to establish clandestine removal, leading to the rejection of the demand of duty and penalty.6. Non-Accountal of Unaccounted Stock in Factory:The Tribunal addressed the issue of the unaccounted stock of cotton yarn found in the appellant's factory. Despite the appellant's attempt to explain the discrepancy, the Tribunal found the explanation lacking in credibility, especially considering the absence of daily stock accounting. This lack of proper record-keeping supported the decision to uphold the confiscation of the unaccounted stock.7. Validity of Redemption Fine:Lastly, the Tribunal considered the redemption fine imposed in relation to the confiscated quantity of cotton yarn. The fine, set at Rs. 10,000 in lieu of confiscation, was deemed reasonable given the value of the seized yarn. The Tribunal upheld the redemption fine as valid, emphasizing the importance of accountability and adherence to excise regulations.In conclusion, the Tribunal set aside the demand of duty and penalty while upholding the confiscation and redemption, disposing of the appeal accordingly.