2003 (10) TMI 160 - AT - Central Excise

Tribunal overturns penalties for technical breaches in factory records, finding no tax evasion intent.

SUMEET INDUSTRIES LTD. Versus COMMISSIONER OF CENTRAL EXCISE, SURAT

The Tribunal allowed the appeal in a case involving discrepancies in factory records regarding non-accounted goods. It found that there was no clear ... Confiscation and penalty - Non-accountal of goods Issues involved: Appeal against order imposing fine and penalty for non-accounted goods in factory records.Summary:The case involved an appeal by both the assessee and the Revenue against the same order regarding non-accounted goods found in the factory records. The appellants, engaged in manufacturing Poly Propylene Dop dyed yarn, were visited by officers who discovered discrepancies in the production records. The authorities imposed fines and penalties, which were later partially reduced by the Commissioner (Appeals). The main issue revolved around whether the discrepancies amounted to intentional evasion or were merely technical breaches.(a) Intent to Evade: The Tribunal noted that Rule 173Q(1)(a) requires a breach with intent to evade, which was not clearly established in this case. The appellants' explanation that they were not allowed to make entries by the officers was supported by evidence showing duty payment clearance on the day of the visit. Therefore, the Tribunal accepted the appellant's plea that the non-accounted goods would have been debited and accounted for.(b) Technical Breach: The Commissioner's characterization of the matter as a technical breach should have led to a different penalty imposition under Rule 226, as per CBEC guidelines. Since there was no intention to evade and the breach was technical, the Tribunal found that confiscation and penalty under Rule 173Q(1) were not justified.(c) Timing of Entry: The Tribunal considered the holiday on the day before the visit and the absence of specific guidelines regarding the timing of entries in the statutory record. The failure to make an entry at the time of the visit was deemed an infringement, but not one warranting a penalty. The Tribunal emphasized that penalties should be reserved for deliberate defiance of the law or dishonest conduct.(d) Confiscation: The Tribunal found no justification for ordering the confiscation of the goods found in the premises, given the nature of the discrepancies and the lack of evidence of intentional evasion.(e) Decision: In light of the above considerations, the Tribunal allowed the appeal, setting aside the confiscation, redemption fine, and penalties imposed on the appellants and the Excise Clerk.The Tribunal ordered accordingly, ruling in favor of the appellants and overturning the penalties imposed in the initial order.