2009 (8) TMI 910 - AT - Central Excise

Tribunal overturns PVC scrap confiscation and penalty, clarifying duty exemption rules.

KESHAV POLYVIN Versus COMMISSIONER OF C. EX., LUDHIANA

The Tribunal set aside the decision to confiscate seized PVC scrap under Central Excise Rules, as the scrap was captively used and fully exempt from duty, ... - Issues:1. Confiscation of seized PVC scrap under Central Excise Rules.2. Imposition of penalty on the appellant.3. Maintenance of stock account in RG1 Register for excisable goods.Confiscation of seized PVC scrap under Central Excise Rules:The case involved the appellant, a manufacturer of PVC pipes, who generated waste and scrap during the manufacturing process, which was then reused for further production. Central Excise Officers visited the factory and found that the scrap, though liable to duty, was fully exempt under Notification No. 67/95-C.E. The Officers seized the PVC scrap as the stock account was not being maintained in the RG1 Register. The Asstt. Commissioner ordered the confiscation of the seized scrap under Rule 25(1)(b) of Central Excise Rules, 2002, with an option for redemption on payment of a fine. The Commissioner (Appeals) upheld this decision. However, the Tribunal held that since the scrap was captively used and fully exempt from duty, the non-maintenance of the stock account for the scrap could not warrant confiscation or penalty. The Tribunal set aside the impugned order and allowed the appeal.Imposition of penalty on the appellant:The appellant argued that the scrap generated during the manufacturing process was fully used for production, exempt from duty under Notification No. 67/95-C.E., and there was no dispute on this issue. The appellant started maintaining the stock account upon directions from Central Excise Officers. The Department contended that despite the exemption, as the scrap was excisable, the stock account should have been maintained. The Department defended the penalty and confiscation based on the non-maintenance of the stock account. The Tribunal, after considering both arguments, held that the non-maintenance of the stock account for the captively used scrap did not justify the imposition of penalty or confiscation. Therefore, the Tribunal set aside the impugned order imposing the penalty.Maintenance of stock account in RG1 Register for excisable goods:The key contention revolved around the requirement to maintain a stock account in the RG1 Register for excisable goods. The Department argued that despite the exemption, the stock account should have been maintained for the excisable scrap. The appellant, on the other hand, maintained that they started maintaining the stock account promptly upon being directed to do so by the Central Excise Officers. The Tribunal found that since the scrap was fully exempt from duty and was being re-used in the manufacturing process, the non-maintenance of the stock account for the scrap used captively did not amount to a serious offense warranting confiscation or penalty. Therefore, the Tribunal held that the non-maintenance of the stock account for the exempt scrap was not a valid ground for the imposition of penalty or confiscation, and accordingly, set aside the impugned order.