2017 (12) TMI 1086 - AT - Central Excise

Clandestine removal - the stocks of finished goods as well as raw materials were not entered in the record up-to-date - Section 11AC of the CEA, 1944 - Held that - undisputed facts are that the records of finished goods and records of raw materials, including inputs was not maintained from 18/08/2013 to 04/09/2013. It is undisputed fact that finished goods valued at ₹ 30,87,050/- were available in the factory which were not entered into RG-1 register and raw materials valued at ₹ 40,33,338/- were available in the factory which were unaccounted for - It is very clear from the provisions of Rule 25 that provisions of said Rule are subject to provisions of Section 11AC of the CEA, 1944. In the SCN or during the whole proceedings Revenue has not established that provisions of Section 11AC were applicable in the present case. Appeal dismissed - decided against Revenue.

Summary

Issues:
- Proper maintenance of records under Central Excise Rules, 2002
- Confiscation of goods and imposition of penalties based on record-keeping discrepancies
- Applicability of Rule 25 of Central Excise Rules, 2002
- Adjudication of case by the Commissioner (Appeals)
- Grounds of appeal by the Revenue
- Arguments presented by both sides
- Interpretation of Rule 25 provisions and Section 11AC of the Central Excise Act, 1944

The case involved a dispute regarding the maintenance of records by a manufacturer of HDPE/PP woven sacks who was availing Cenvat credit. Central Excise officers found discrepancies in record-keeping during a visit to the factory, leading to the discovery of unaccounted finished goods and raw materials. A show cause notice was issued proposing confiscation of the goods under Rule 25 of Central Excise Rules, 2002. The subsequent Order-in-Original directed the manufacturer to pay a redemption fine. The Commissioner (Appeals) set aside the confiscation and penalty, stating that improper record maintenance did not prove an intention to evade duty. The Revenue appealed, citing a Tribunal decision and arguing that the Commissioner erred in not considering the factual aspects of the case.

The Tribunal analyzed the case, noting that records were indeed not maintained for a specific period, and goods were found unaccounted for during the visit. The proceedings were conducted under Rule 25, which allows for confiscation and penalties in case of contraventions. However, the Tribunal emphasized that Rule 25 is subject to Section 11AC of the Central Excise Act, 1944. As the Revenue failed to establish the applicability of Section 11AC in the case, the Tribunal upheld the Commissioner's decision. The Tribunal dismissed the Revenue's appeal, affirming that the manufacturer was entitled to consequential relief as per the law.

In conclusion, the judgment focused on the importance of proper record-keeping under Central Excise Rules, the application of Rule 25 in cases of contraventions, and the necessity to establish the relevance of Section 11AC for imposing penalties. The decision highlighted the need for thorough investigation and evidence to prove intent to evade duty before confiscation and penalties can be imposed.