CESTAT sets aside confiscation and penalties for unrecorded MS ingots lacking evidence of deliberate clandestine removal intent

CESTAT New Delhi set aside confiscation, redemption fine, and penalties imposed on appellants for excess MS ingots and angles found without statutory record entries. The tribunal held that mere violation of Central Excise Rule 10 and improper accounting does not establish deliberate intent for clandestine removal without corroborative evidence. Department failed to prove suppression or collusion with intent to evade duty beyond finding unrecorded stock. Penalty under Rule 25(1) could not be sustained absent evidence of actual evasion or abetment. Personal penalty on employee appellant was also set aside as no benefit to employee was established. Appeal allowed.

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Issues Involved:
1. Confiscation of goods.
2. Imposition of penalty on appellant No. 1.
3. Imposition of penalty on appellant No. 2.

Summary:

1. Confiscation of Goods:
The issue before the tribunal was whether the confiscation of seized goods and the imposition of redemption fine of Rs 15 lakhs was correct. The Central Excise officers found excess stock of MS ingots and MS Angles at the appellant's premises, which were not recorded in the statutory books. The tribunal noted that while there was some excess stock, the Department failed to provide cogent evidence to prove that the excess stock was intended for clandestine removal without payment of duty. The tribunal referenced the case of Dhanraj Enterprises vs CCE, which held that non-accountability in RG-1 register does not ipso facto indicate an intention to evade duty. Consequently, the tribunal set aside the redemption fine imposed on the goods.

2. Imposition of Penalty on Appellant No. 1:
The tribunal examined whether the imposition of penalty under Rule 25(1)(b) was justified. It was emphasized that for invoking Section 11AC and Rule 25(1), there must be evidence of suppression, collusion, etc., with an intent to evade duty. The tribunal noted that while excess quantities were found, there was no corroborative evidence to show an intent to evade. The tribunal referenced the Delhi High Court's decision in Ganpati Rolling Mills, which clarified that the requirements of Section 11AC must be fulfilled before imposing penalties under Rule 25. The tribunal concluded that the Department failed to establish the necessary intent to evade, and thus, the penalty under Rule 25(1) could not be upheld.

3. Imposition of Penalty on Appellant No. 2:
The tribunal reviewed the penalty imposed on the authorized signatory under Rule 26(1). It was noted that the essential ingredient for invoking this rule is evidence of involvement in actual evasion or abetment. The tribunal found no such evidence against the authorized signatory. Citing the case of Carpenter Classic Exim Pvt. Limited, the tribunal held that personal penalties on employees acting under the direction of their employer need not be imposed. Therefore, the tribunal set aside the penalty imposed on appellant No. 2.

Conclusion:
The tribunal, after considering the rival contentions and the lack of sufficient evidence to prove intent to evade duty, set aside the impugned order and allowed both appeals.

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