2009 (1) TMI 110 - HC - Central Excise

High Court affirms Tribunal's decision on goods confiscation and penalties, duty liability on goods' removal

The High Court upheld the Tribunal's decision that the confiscation of excess stock of goods was unwarranted due to a reasonable explanation for ... Goods were entered in their private records, but could not be entered in RG1 Register - respondent has tendered explanation as to why the necessary entries were not made in the statutory records - presumption cannot be drawn that excess stock was going to be removed clandestinely – since there is no any evidence on record to show clandestine removal, confiscation is not permissible – penalty imposed on Production Engineer was rightly deleted by tribunal Issues:1. Confiscation of goods based on discrepancies in records.2. Reduction of penalty under Rule 25(1) of the Central Excise Rules, 2002.Confiscation of Goods:The appellant challenged the order of the Customs Excise and Service Tax Appellate Tribunal regarding the confiscation of excess stock of finished goods and raw materials found at the manufacturing unit's premises. The appellant argued that the excess stock indicated a potential clandestine removal without paying excise duty, justifying confiscation, redemption fine, and personal penalties. However, the respondent provided an explanation for the discrepancy in records, stating that entries were not made due to the concerned person being on leave. The Tribunal found this explanation reasonable and not disproved by evidence, concluding that confiscation was unwarranted. The High Court upheld the Tribunal's decision, emphasizing that the liability to pay duty arises only when goods are to be removed, which had not occurred in this case. Without additional evidence of clandestine intent, confiscation was deemed unjustified.Reduction of Penalty:Regarding the penalty under Rule 25(1) of the Central Excise Rules, 2002, the Tribunal sustained a penalty of Rs. 10,000 on the manufacturing unit for the technical breach of not entering goods in the RG-1 Register for three days. The High Court found no legal flaw in this decision. Additionally, the penalty imposed on the Production Engineer was deleted by the Tribunal. The respondent's explanation that the responsible person was on leave and unchallenged supported the deletion of the penalty for the Production Engineer. As there was no evidence establishing the Production Engineer's duty to make entries in statutory records, the Tribunal's decision to remove the penalty was deemed appropriate. Consequently, the appeal was dismissed for lack of a substantial question of law, upholding the Tribunal's order on both the confiscation of goods and the reduction of penalties.