2017 (5) TMI 231 - AT - Central Excise

Tribunal Overturns Penalties & Confiscations in Central Excise Case

The Tribunal allowed the appeals of M/s Kashi Laminators Pvt. Ltd. and Shri Bhupesh Bansal, setting aside the demands and penalties imposed by the ... Clandestine manufacture and removal - laminated pouch - Held that: - the Cross Examination of Shri Bhupesh Bansal clearly indicate that there is no sufficient grounds for confirmation of demand of ₹ 9,18,613/- against M/s Kashi Laminators Pvt. Ltd. - Revenue also did not establish as to how the raw materials were procured for manufacture of goods in question which were alleged to have been cleared clandestinely, Original Authority could not establish the unaccounted manufacture and clandestinely clearance of laminated pouch. Therefore, we hold that the confirmation of demand of ₹ 9,18,613/- is not sustainable - appeal rejected - decided against Revenue. Issues Involved:1. Authenticity and relevance of loose slips as evidence.2. Confiscation of finished goods and raw materials.3. Confiscation of cash seized during the search.4. Imposition of penalties under Rule 26 of Central Excise Rules, 2002.Detailed Analysis:1. Authenticity and Relevance of Loose Slips as Evidence:The Tribunal previously questioned the authenticity of loose slips mentioning 'Sanjay Kumar, LKO.' During cross-examination, Shri Bhupesh Bansal clarified that 'Sanjay Kumar' was a code name for M/s Durga Trading Company (DTC) and not an actual person. The Original Authority did not adequately consider this clarification and confirmed the demand based on these slips, which was contrary to the Tribunal's directions. The Tribunal found no sufficient grounds for the confirmation of the demand of Rs. 9,18,613/- against M/s Kashi Laminators Pvt. Ltd., as the evidence relied upon was not sustainable.2. Confiscation of Finished Goods and Raw Materials:The finished goods were found within the factory premises of M/s Kashi Laminators Pvt. Ltd., and thus, according to the Tribunal, they could not have been confiscated as they had not reached the stage of clearance. Additionally, the Tribunal accepted the contention that there are no provisions in the Central Excise Act to confiscate raw materials. Therefore, the confiscation of both finished goods and raw materials was deemed unsustainable.3. Confiscation of Cash Seized During the Search:The Tribunal had directed the Original Authority to establish a link between the seized cash and the sale proceeds of clandestinely removed goods. However, the Original Authority failed to establish this link. Consequently, the confiscation of Rs. 2 lakhs in cash was found to be contrary to the provisions of law, as the necessary connection to the alleged clandestine activities was not proven.4. Imposition of Penalties Under Rule 26 of Central Excise Rules, 2002:The Original Authority imposed a penalty of Rs. 10 lakh on Shri Bhupesh Bansal under Rule 26 of Central Excise Rules, 2002, which applies when a person deals with goods liable for confiscation. Since the goods were not liable for confiscation, the Tribunal held that the penalty on Shri Bhupesh Bansal was not as per law. Similarly, no penalty was imposed on Shri Lal Chand Agarwal, as the conditions for such a penalty were not met.Conclusion:The appeals filed by M/s Kashi Laminators Pvt. Ltd. and Shri Bhupesh Bansal were allowed, and the demands and penalties imposed by the Original Authority were set aside. The Tribunal rejected the appeals filed by Revenue against M/s Kashi Laminators Pvt. Ltd., Shri Bhupesh Bansal, and Shri Lal Chand Agarwal. M/s Kashi Laminators Pvt. Ltd. and Shri Bhupesh Bansal were entitled to consequential relief in accordance with the law.