2015 (10) TMI 688 - HC - Central Excise

Court rules against confiscation of goods under Rule 173Q: excise duty liability clarified

The court ruled in a case involving the confiscation of unaccounted finished goods and raw material under Rule 173Q of CE Rules, 1944. Emphasizing that ... Confiscation of goods - Non accounting of goods in RG-1 register - held that:- Assuming that there was some delay in making entries in the relevant form, the goods were not liable for confiscation. Rule 173Q of the Rules no doubt empowers confiscation of the goods on the ground that the entries are not properly made. However, every failure to make the entry or every defect therein does not constitute the basis for confiscation of the goods, as long as they are not removed from the premises. It is too fundamental to be reaffirmed that the liability to pay the excise duty arises only when the manufactured goods are removed from the premises. The rest of the measures are only regulatory in nature. Confiscation of goods that are not removed from the premises can be done, only when clear evidence exists to the effect that the goods were not manufactured but were stored with an oblique motive. No such grounds are even pleaded in the instant case - Commissioner as well as CEGAT took note of the judgment of this Court in M/s. Southern Steel Ltd. v. Union of India and others - [1978 (7) TMI 114 - ANDHRA PRADESH HIGH COURT]. We are of the view that no case is made out for directing CEGAT to refer the questions to this Court. - Decided against Revenue. Issues:1. Confiscation of unaccounted finished goods under Rule 173Q of CE Rules, 1944.2. Confiscation of unaccounted raw material under Rule 173Q of CE Rules, 1944.Issue 1: Confiscation of unaccounted finished goods under Rule 173Q of CE Rules, 1944:The case involved a manufacturer of man-made fabrics subject to excise duty. A search conducted revealed unaccounted cloth and raw material in the premises. Allegations were made regarding non-accounting in the RGI register, leading to an order of confiscation. The respondent's defense was that the cloth was manufactured just before the search, and relevant particulars were recorded. The court emphasized that excise duty liability arises upon goods' removal from premises, and mere entry delays do not warrant confiscation. Rule 173Q allows confiscation for improper entries, but not every failure constitutes grounds for confiscation if goods remain on premises. The court cited a judgment emphasizing the need for clear evidence of goods being stored with ulterior motives for confiscation, which was lacking in this case. Ultimately, the court found no basis to direct CEGAT to refer the questions to the court.Issue 2: Confiscation of unaccounted raw material under Rule 173Q of CE Rules, 1944:The same principles applied to the confiscation of unaccounted raw material as to finished goods. The court reiterated that excise duty liability arises upon removal of manufactured goods, and regulatory measures do not warrant confiscation if goods are within premises. The court emphasized the need for clear evidence of goods being stored with malicious intent for confiscation under Rule 173Q. The court referenced a previous judgment and concluded that the case did not justify directing CEGAT to refer the questions to the court.In summary, the judgment dealt with the confiscation of unaccounted finished goods and raw material under Rule 173Q of CE Rules, 1944. The court highlighted the importance of excise duty liability upon goods' removal from premises and emphasized that mere delays in entry do not warrant confiscation if goods are within the premises. Clear evidence of goods being stored with malicious intent is required for confiscation under Rule 173Q. Ultimately, the court found no grounds to direct CEGAT to refer the questions to the court based on the lack of evidence supporting confiscation in this case.