TaxTMI 
TaxTMI 
2014 (1) TMI 1213
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....nd scrutinized the records of production and clearance of MS Ingots. Scrutiny of RG-1 Register (Daily Stock Account) maintained at the factory of the appellant showed a balance stock of 260.290 MT held by them on that date. However, on verification, the actual stock of MS Ingots lying in the factory premises of the appellant were found to be much in excess of what was shown as balance stock in the RG-1 Register. Therefore, a physical verification of stock of MS Ingots lying in the factory premises was undertaken by the Central Excise Officers and altogether 10262 pieces of MS Ingots were found stored in different lots. To determine the weight of MS Ingots lying in the stock, weighment of 1012 pieces of MS Ingots were selected randomly and total weight of 1012 pieces was found to be 83950 Kgs. and therefore, the average weight of one piece of MS Ingots worked out to 82.95 Kgs. Accordingly, the weight of total stock of MS Ingots physically available in the factory premises was worked out to 861.495 MT. An excess stock of 601.205 MT was thus found than what was recorded in the RG-1 Register, i.e. 260.290 MT. After issuing the show cause notice dated 23/24.5.2001 and after affording op....
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....r RG-1 Register, filing returns giving false production figures and holding excess stock with an intent to clear goods clandestinely and evade payment of central excise duty. 7. Learned counsel for the appellant contended that in paragraph (10) of the order dated 29.7.2004, the Commissioner of Central Excise categorically held that there was no evidence on record that the appellant ever intended to clandestinely remove the goods without payment of duty and in such a situation, the alleged contravention of the provisions of Rules 53, 54 and 173G(4) cannot authorize the respondents to levy penalty under Rule 173Q read with Rule 209. Learned counsel further submitted that since the appellant started production only on 29.1.2001, the MS Ingots lying in the factory premises were only for test products with incorrect measurement and were not marketable and while so, the Commissioner proceeded on wrong assumption that the goods lying in the factory premises were finished goods and marketable. It was further submitted that the goods, being of different lengths and only unfinished, could not be removed for sale or for marketing purposes and it was, therefore, not incumbent upon the appella....
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....y from the place or premises specified under rule 9 or from the store-room or other place of storage approved by the Commissioner under rule 47, the quantity removed for export without payment of duty, and such other particulars as may be elsewhere prescribed or as the Central Board of Excise and Customs or the Commissioner may, by general or special order, require, and, where so required by the Commissioner, by a written notice, shall submit a similar return in the proper Form showing all the other products manufactured in and issued from the factory during the same month." 10. In so far as the first limb of submission that the goods were not in fully finished condition and that the appellant was not required to make entries in RG-1 Register; therefore, there was no violation of Rules 53 and 54, is concerned, the same appears to be an afterthought. The said contention was not raised by the appellant in the show cause submitted by the appellant on 10.10.2001 and 7.3.2002. In the show cause submitted by the appellant on 10.10.2001, the appellant had only disputed the variation in measurement and also the mode of physical verification undertaken by the Officers. Disputing the physic....
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.... the Commissioner of Central Excise, it was held as under:- "..However, unaccounted for stock found in the factory in the course of physical verification of the stock does not by itself establish, beyond doubt, the intention of the noticee to remove the same clandestinely without payment of duty,....." Laying emphasis on the observations made in paragraph 10 of the order of the Commissioner, learned counsel for the appellant contended that when the Commissioner of Central Excise categorically held that there was no evidence or material that the appellant intended to clandestinely remove the goods without payment of duty and in such a situation, the alleged contravention of the provisions of Rule 53 and 173G(4) cannot authorize the respondents to levy penalty under Rule 173Q read with Rule 209. 14. Refuting the contention, learned counsel for the respondent submitted that non-accounting of goods in the statutory records is a clear evidence to show the intention of the assessee for clandestine removal of the goods and hence, the order of confiscation, redemption fine and penalty are fully justified. 15. Rule 173Q reads as under:- "173Q. Confiscation and penalty.- (1) If any manu....
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....8. In the facts and circumstance of the instant case, the above decision rendered in the case of Akbar Badrudin Giwani does not apply. As pointed out earlier, show cause notice was issued to the appellant not only for holding of excess stock with the intention to clear the goods clandestinely and evade payment of central excise duty but also for deliberately mis-stating the production figures in RG-1 Register and filing of returns giving false production figures. It cannot, therefore, be contended that the show cause notice was issued only for violation of Rules 53 and 54. Learned counsel for the appellant reiterated the submission that Rule 173Q and Rule 209 being a penal clause, intention is in-built in it and therefore, mens rea is an essential ingredient to attract the Rules. It was submitted that Rule 173Q could not be legally invoked against the appellant merely on account of failure to maintain the accounts and that Revenue has to prove the intention of the appellant for clandestine removal of goods. Rule 173Q deals with confiscation and penalty and Rule 209 deals with penalty provision. Rule 173Q - confiscation and penalty - arise under breach of duty provided in the Centra....