2011 (2) TMI 1202 - HC - Central Excise

Confiscation and penalty - Shortage of input and excess of finished goods - Assessee by its own volition reversed the input credit excise duty - finished goods were found in excess of the quantity mentioned in the books. There was violation of Rule 173Q(1)(b) there is no illegality in imposing the penalty or the redemption fine authorities rightly held that there was violation of Rule 173Q there is no illegality in the finding all questions decided against the Assessee and in favour of the Department

Summary

Issues:
1. Confiscation and penalty imposed on the Assessee by the Central Excise Department.
2. Reduction of redemption fine and penalty by the Tribunal.
3. Questions referred by the High Court for opinion on the Tribunal's decision.
4. Dispute over redemption fine and penalty in respect of goods found in excess.
5. Interpretation of Rule 173Q regarding maintenance of accounts for excisable goods.
6. Allegations of intention to evade excise duty based on shortage of inputs and excess finished goods.

Analysis:
1. The Central Excise Department inspected the factory of the Assessee and found discrepancies in input quantities and excess finished goods, leading to a notice for confiscation and penalty.
2. The Tribunal reduced the redemption fine and penalty imposed by the adjudicating officer, but the High Court directed the Tribunal to consider specific questions for opinion.
3. The High Court questioned the Tribunal's adverse inference on the Assessee's intention to evade duty based on discrepancies and excess stock, seeking clarification on the justification for such conclusions.
4. While the Assessee voluntarily reversed input credit excise duty for shortages, a dispute remained over the redemption fine and penalty for excess finished goods.
5. Rule 173Q mandates penalties for failure to maintain accounts for excisable goods, which was violated due to the excess finished goods found without proper documentation.
6. The Tribunal's decision was upheld by the High Court, emphasizing that the excess finished goods, coupled with input shortages, indicated a violation of Rule 173Q, justifying the penalty and redemption fine. The Court rejected the Assessee's arguments on lack of intention to evade duty, as the discrepancies were not clerical errors and indicated a deliberate violation of the rules.

This comprehensive analysis covers the issues raised in the legal judgment, detailing the inspection findings, penalties imposed, Tribunal's decision, High Court's questions, and the interpretation of relevant rules regarding excisable goods and intention to evade duty.