2016 (12) TMI 1381 - AT - Central Excise

Appeal granted with modified fines & penalties, confiscation set aside. Upholding law, ensuring fairness.

The Tribunal partially allowed the appeal by modifying the redemption fine and penalty, setting aside the confiscation of plants and machinery. The ... Confiscation of goods - imposition of penalty - liability for duty on diversion - mens rea not necessary for penalty under Central Excise - Rule 9(2) read with Rule 209(1) of Central Excise Rules, 1944Confiscation of goods - imposition of penalty - liability for duty on diversion - mens rea not necessary for penalty under Central Excise - Whether confiscation of the seized polyester texturised yarn and imposition of penalty on the appellant are sustainable. - HELD THAT: - The Tribunal found that four consignments were cleared under AR-3A procedure to another 100% EOU but three consignments were intercepted and did not reach the declared consignee, constituting a contravention of the Central Excise Act and rules. The Court accepted the Revenue's submission that, for purposes of confiscation and penalty under the Central Excise law, it is not always necessary to prove mens rea; liability arises from the diversion of goods which attracted duty and penal consequences. Although the appellant accepted liability for duty and interest, its contention that confiscation and penalty rested solely on uncorroborated, untested statements was not accepted as sufficient to vitiate the finding of contravention. However, the Tribunal held that the quantum of redemption fine and penalty imposed by the adjudicating authority was excessive in the facts of the case and accordingly exercised its appellate discretion to reduce the financial sanctions while upholding the legal basis for confiscation and penalty. [Paras 6]Confiscation of the seized goods and imposition of penalty under Rule 9(2) read with Rule 209(1) are sustainable, but the redemption fine and penalty are excessive and are reduced.Confiscation of plants and machinery - Whether confiscation of the appellant's plants and machinery is justified. - HELD THAT: - The adjudicating authority directed confiscation of plants and machinery without placing on record material to demonstrate that the appellant was a habitual offender or that confiscation of capital plant was warranted. The Tribunal found no valid basis in the record to sustain such harsh measure and therefore interfered with that portion of the order. [Paras 6]Confiscation of plants and machinery is set aside for lack of supporting material.Final Conclusion: The appeal is partly allowed: confiscation of goods and penalties under Rule 9(2) read with Rule 209(1) are sustained but the redemption fine and penalty are substantially reduced; confiscation of plants and machinery is set aside. Issues:1. Confiscation of goods seized by the Department2. Imposition of penalty on the AppellantDetailed Analysis:1. The appeal was filed against an order passed by the Commissioner, C.Ex. & S.Tax, Surat, regarding the seizure of consignments of polyester texturised yarn (PTY) by the Department. The Appellants, a 100% EOU, had cleared the goods for supply to another EOU but were intercepted by the Department on suspicion of diversion to the open market. The Show Cause Notice proposed confiscation of seized goods, recovery of excise duty, customs duty, interest, and penalty. The Appellants challenged the order, focusing on confiscation of goods, penalty, and confiscation of plants and machinery under the Central Excise Act and Rules. The Appellant's advocate argued that the diversion was not intentional, no corroborative evidence was presented, and the statements implicating the Appellant were uncorroborated. Citing relevant case laws, the advocate contended that the confiscation and penalty were unsustainable.2. The Authorized Representative for the Revenue defended the findings, stating that there was sufficient evidence of the Appellant's awareness of the diversion, justifying the penalty and confiscation. The goods were cleared without duty payment for use in another EOU but were diverted to the local market, contravening the Central Excise Act. After hearing both sides, the main issue was whether the confiscation and penalty were justified. The Tribunal noted that while the goods were cleared with proper documents, they were diverted en route. The Revenue argued that duty payment was required as the goods did not reach the intended destination. The Tribunal agreed with the Revenue, stating that contravention of the Act and rules warranted confiscation and penalty, even without proving mens rea. However, the Tribunal found the redemption fine and penalty excessive, reducing them to ensure justice. The confiscation of plants and machinery was set aside due to lack of evidence of habitual offense.In conclusion, the Tribunal partially allowed the appeal by modifying the redemption fine, penalty, and setting aside the confiscation of plants and machinery, emphasizing the importance of upholding the law while ensuring fairness and proportionality in penalties imposed.