2019 (1) TMI 172

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....ared. After taking the physical stock of finished goods and comparing them to the stock declared by the officers of the appellant, the Department observed the following stock viz-a-viz physical stock position: Sl. No. Description of Goods Stock entered in Daily Production register (RG-I) Actual stock as per physical verification Stock found in excess Value of stock found in excess (Approx.) 1 TMT Bars 1702.235 MT 2456.000 MT 753.765 MT Rs.1,95,22,513.50 2 Mis-rolls 87.005 MT 98.000 MT 10.995 MT Rs.1,99,009.50 Resultantly, a SCN No. 3718 dated 28.11.2016 was served alleging the clandestine clearance of goods during the month of February to May 2016 and proposing the aforesaid seized stock to be confiscated under provisions of Rule 25 of Central excise Rules 2002 with the imposition of redemption fine in view of the said confiscation and the penalty under Rule 25 of Central Excise Rules, 2002 was also proposed. The said SCN was initially adjudicated by Assistant Commissioner vide Order No. 11 dated 29.09.2017. Being aggrieved an Appeal before Commissioner (Appeals) was filed who vide Order under challenge i.e. one bearing No. 4....

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....s confirmed the proposed confiscation of the stock and the penalties on the Director of the appellant Company on the ground of unaccounted production and clearances being evidenced by the categorical admission of the Director and Supervisor of the appellant Company. Also on the ground that there were parallel invoices of same number but different consignees as seized alongwith the goods. It was also held that mensrea is not at all required to invoke Rule 25 and Rule 26 of Central Excise Rules. To adjudicate as to whether these findings are reasonable, the impugned Rules have to be looked into: Rule 25 of Central Excise Rules 2002 defines as under: (1) Subject to the provisions of section 11AC of the Act, if any producer, manufacturer, registered person of a warehouse or a registered dealer, - (a) Removes any excisable goods in contravention of any of the provisions of these rules or the notification issued under these rules; or (b) Does not account for any excisable goods produced or manufactured or stored by him; or (c) Engages in the manufacture, production or storage of any excisable goods without having applied for the registration certificate r....

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....tion 11ac of the ce act" and not an non-obstante clause which would have begun with the words "Notwithstanding the provisions of section 11ac of the ce act". It is plain that the CE Rules are subordinate legislation and have to abide the discipline of the statute under which they are made. Where Rule 25(1) expressly begins with "Subject to the provisions of section 11ac of the ce act", obviously the requirements of Section 11AC will have to constitute a condition subject to which the power under Rule 25 can be exercised. Rule 25 of the CE Rules itself came up for interpretation before the Gujarat High Court in Saurashtra Cement Ltd. (supra) wherein para 17 it was observed as under: "17. It is also to be borne in mind that Rule 25 starts with the word "Subject to the provisions of Section 11AC.....". Section 11AC of the Central Excise Act deals with penalty for short levy or non-levy of duty in certain cases. It says that where any duty of excise has not been levied or paid or has been short levied or short paid or erroneously refunded by reasons of fraud, collusion or any wilful misstatement or suppression of facts, or contravention of any of the provisions of this Act or of the....

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....and from where they were seized by the seizing officer. It was necessary to record as to what steps the seizing officer had taken so as to refrain himself and persons accompanying him from causing any damage to the documents as also to avoid any interpolation or inference in any manner with such documents and contents thereof. It was also necessary to record as to what steps were taken to safeguard the documents and to avoid possibility of any stranger interference with the seized materials. In other words, when any document is seized, it necessary to enclose the same in a cover and to seal such cover so that no other person gets opportunity to interfere with such document. All these things can of course be recorded briefly, but precisely. This aspect gains more importance once there is objection regarding veracity of the panchanama and the contents of the documents stated to have been seized in the course of such panchanama. A Panchnama should disclose proper description of the premises and the things found in the premises. The information in this regard assumes more importance when there is serious dispute about the articles alleged to have been recovered and seized from such pre....

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....udicating authority to presuppose as what could be the subject of cross examination. In absence of such opportunity the statement of witnesses is not worth reliance. 7. Further basis of confirming the confiscation has been the evidence as that of eye estimation for determination of stock but it has been a settled principle that the allegations of clandestine removal of eye estimation is not correct. I draw my support from the decision of Tribunal Mumbai in the case of Nilesh Steel and Alloys Pvt. Ltd. Vs. CCE, Aurangabad 2008 (229) ELT 399. This Tribunal also in the case of Shri Ganesh Alloys Vs. Chandigarh 2016 (337) ELT 595 wherein it was held that since the excess of stock was found merely on eye estimation and no physical stock taking or done the allegation of excess stock found and that the same has not been recorded in the statutory record were held not sustainable. 8. Finally, qua the alleged admission of the Director of appellant, I am of the opinion that allegations of clandestine removal are serious in nature and the clandestine activities are quasi criminal hence the revenue alleging the same is required to prove it by sufficient corroborative evidences. The Princi....