2016 (11) TMI 510 - AT - Central Excise

Appellate Court Overturns Orders in Zarda Manufacturing Case

The appellate court overturned the orders of the Dy. Commissioner and Commissioner (A) in a case involving the confiscation of goods, duty demand, and ... Clandestine removal - confiscation of final product as well as raw material - goods not entered by the appellant in their RG-23 part 1 records - Held that: - by extending the benefit of doubt to the appellant, the confiscation of finished goods set aside. In as much as the goods were still within the factory premises and there was a doubt about the same having reached the RG-1 stage, confiscation of the same is bad in view of the law laid down by the Tribunal in the case of Kamal Plywood & Allied Industries Pvt. Ltd. vs. CCE Meerut [1995 (12) TMI 112 - CEGAT, NEW DELHI] as also in the case of Indra Metal Works Vs. CCE Pune 1999 [1998 (5) TMI 193 - CEGAT, MUMBAI] Confiscation of raw material - Held that: - there is no provision for confiscation of the unaccounted raw material. Demand - Held that: - the Revenue has not been able to produce any evidence on record to show that the said goods were actually manufactured in the appellant's factory and were cleared there from, without payment of duty of excise. The fact of non availability of any evidence read with the fact of the appellant's FIR and the resultant disclosure of the fact of presence of spurious manufacturers when taken into consideration will lead to the unsubstantiated allegation of the Revenue as regards clandestine clearances. As such by extending the benefit of doubt to the assessee, the confirmation of the demand in respect of the said goods and the imposition of penalty on both the appellants is set aside. In as much as the appellant have not claimed the goods seized from the railway station, their confiscation is upheld. Appeal allowed. Issues:1. Confiscation of finished goods, raw materials, and packaging materials.2. Demand of duty and penalty imposition.3. Confiscation of goods seized from the railway station.4. Adjudication by Dy. Commissioner and Commissioner (A).Analysis:1. The appellant, engaged in Zarda manufacturing, faced confiscation of goods not entered in records. Officers seized goods valued at 14.63 lakhs approx. Statements were recorded, and goods cleared to a godown were inspected. Unclaimed Chewing Tobacco packets at a railway station were linked to the appellant. Show cause notice proposed confiscation and duty demand of Rs. 98,633. Dy. Commissioner's order confiscated goods and imposed penalties on noticees.2. The appellant contested confiscation, arguing raw materials were recorded, and finished goods were not finalized. Lack of evidence for proper verification was highlighted. Alleged excess stock lacked proper inventory, raising doubts. Benefit of doubt led to setting aside confiscation. Confiscation of raw materials was deemed unwarranted due to recorded entries and Cenvat Credit availed.3. Goods seized from the railway station led to duty demand and confiscation. Appellant denied manufacturing those goods, citing variations in samples. FIR against spurious manufacturers and subsequent raids supported the appellant's claim. Lack of evidence linking seized goods to the appellant led to setting aside duty demand and penalties, while upholding confiscation due to non-claim.4. The orders by Dy. Commissioner and Commissioner (A) were challenged and overturned. Lack of concrete evidence, benefit of doubt, and FIR-related raids played crucial roles in the judgment. Confiscations were set aside or upheld based on the presence or absence of evidence and the appellant's contentions.This detailed analysis of the judgment showcases the legal intricacies involved in the confiscation of goods, demand of duty, and penalty imposition, providing a comprehensive understanding of the case and its resolution.