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M/s. Sargodha Enterprises and Deepak Maini (Partner) Versus CCE- New Delhi

Confiscation of goods - Excess stock found which was not recorded in RG-1 Register - foremost contention of the appellant is that the goods confiscated were not finished goods - search was conducted as on 10/3/2011 - Imposition of redemption fine and penalty - Held that:- The fact of recovery of unaccounted finished goods and raw material and the fact that the RG-1 Register was updated only till 28/2/2011 together with the fact of recovery of loose papers containing accounts of clearance of fini .....

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e goods have been manufactured and stored with an intention to remove the same clandestinely and without payment of duty seized the finished goods as mentioned in Annexure-B. The statement given by Shri Neeraj Khattar is also in similar lines admitting the discovery of unaccounted finished goods and raw material. On such score, the contention of the appellant that there was no reasonable belief for confiscation is unacceptable. - The instant case is not a situation where there is mere non-ac .....

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nt reasons. There may be instances where the person incharge of accounts is on leave or change of management etc. which may be valid reason for not updating the register. In the present case, the appellant has not been able to give any explanation for not updating the Register. - Further, entries of clearances of finished goods were found in loose papers. From the totality of facts and evidence presented by the case, the intention to evade payment of duty can be safely inferred. - Contentio .....

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Sulekha Beevi C.S., Member (Judicial) For the Appellant : Shri Naveen Mallick, Advocate For the Respondent : Shri B.B. Sharma, DR ORDER Per Sulekha Beevi C.S. The above two appeals were heard together and are disposed by this common order, as the appeals emanate from the same impugned order. 2. The appellant M/s. Sargodha Enterprises is engaged in manufacture of plastic moulded TV Cabinet. A search was conducted in the premises of the appellant on 10/3/2011. During the search, excess stock of fi .....

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ese, proceedings were initiated against the appellant. A show cause notice proposing for confiscation of goods seized and for imposition of penalties was issued. The show cause notice culminated in the order-in-original dated 31/5/2011 which ordered confiscation of the goods with option to redeem the same on payment of redemption fine of ₹ 1 lakh in the case of finished goods and imposed redemption fine of ₹ 10,000/- in the case of raw materials. A further penalty of ₹ 2,50,000 .....

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fiscation of t he same, and the penalty imposed upon the appellants were upheld. Aggrieved the appellants are before the Tribunal. 3. At the outset, it has to be stated that as the confiscation of raw materials was set aside by the Commissioner (Appeals) the issue in the instant case is with regard to confiscation of finished products and penalty imposed upon appellants under Central Excise Rules. It is also to be mentioned that t he case pertains only to confiscation of goods. No further invest .....

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s confiscated by the respondents were not finished goods as these goods had yet to undergo the process of painting and buffing. It is also submitted that the goods so confiscated included goods which were rejected. ii) That section 110 of the Customs Act, provides that if the proper officer has reasons to believe that goods are liable to confiscation, the officer may seize the goods. The confiscation is illegal as there was no reasonable belief for confiscation as provided under section 110 of t .....

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s will not attract confiscation and imposition of penalty. It is also argued that mere non-accounting will not attract the provisions of Rule 25. That penalty can be imposed only if the non-accountal of excisable goods are done with intention to evade payment of duty. As there is no intention to remove the goods clandestinely, there is no intention to evade payment of duty. The documents resumed at the time of search were returned to the appellant and no further investigations after confiscation .....

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asis. It was also argued that in any case, the redemption fine and penalty imposed are not only unsustainable but also very high. 4. Against this, the arguments on behalf of the respondents is summarized as under: i) The goods confiscated were actually finished goods. The contention of the appellant that the goods confiscated were not finished and that they needed further painting and buffing is not supported by any evidence. The statement of Shri Deepak Maini, partner of M/s. Sargodha Enterpris .....

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ar who was looking after the accounts. It is also admitted that the appellants have manufactured and cleared TV Cabinet in a routine manner from 1/3/2011 to 10/3/2011. But the relevant entries of production and clearance from 1.3.2011 to 10.3.2011 were not made in the RG-1 Register. Some Kaccha slips were recovered showing clearances from the factory against which invoices were not found. So, also the stock of raw materials in the premises was not supported by bills. The entries in the raw mater .....

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ndulged in not keeping proper accounts. Loose papers in file contained entries related to sale of TV Cabinet from their factory. The Cabinet sale file papers showed clearance on 1/1/2011. But as per records, no invoice was seen issued on 1/1/2011. Similarly, no invoice was seen issued on 4/1/2011 and 5/1/2011. Further clearance of 3/1/2011 did not cover the invoice no. 334 dated 3/1/2011. Again either no invoice has been issued or invoice for such quantity has not seen issued on various other da .....

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contention of the appellant is that the goods confiscated were not finished goods. In their reply to the show cause notice, the appellants have stated that the goods confiscated as finished goods were not actually finished goods but had to undergo further process of painting and buffing. That the goods not being finished goods, these were not accounted in RG-I Register. Though in the reply, the appellants are seen to have put forward such a contention, this contention is not supported by the sta .....

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rties. The process of manufacture as explained in their statements does not contain the process of painting and buffing. It is also to be mentioned that the submission made by the counsel that the statement of Shri Deepak Maini recorded on 26/8/2011 is not made part of RUD is correct. In the show cause notice as well as in order-in-original, there is discussion/mention about statement of Shri Deepak Maini recorded on 26/8/2011. The list of relied upon documents shows only three documents. RUD do .....

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n any particular aspect stated in such statement, it would not vitiate the proceedings. The fact that Shri Deepak Maini and Shri Neeraj Khattar in their statements taken at the time of search did not make any whisper regarding the further process of painting and buffing indicates that this contention raised by the appellants is only afterthought. The same has to be considered along with the facts that the RG-1 Register was updated only till 28/2/2011 and also that loose papers containing entries .....

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rom the details of finished goods seized on 10/3/2011, it is seen that the goods valued at ₹ 23,645/- are rejected goods. The rejected goods not being excisable goods their confiscation is not justified. 6. The appellants have further contended that the confiscation is illegal for the reason that the officer had no reasonable belief for confiscation of goods. What is reasonable belief in the mind of the officer is not a question this is to be judged by the Tribunal. Reasonable belief that .....

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ials, together with the statements given are sufficient materials to arrive at a prima facie conclusion or reasonable belief that the goods are liable for confiscation. It is also contented that the respondents have not recorded that there is reasonable belief to confiscate the goods. This argument does not appear to be convincing to me. As already discussed, there was enough material to affirm a prima facie case for confiscation. Shri Deepak Maini in his statement has stated that the officers o .....

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ed on behalf of the appellant is that mere non-accounting of goods will not attract the provisions of Rule 25 for imposition of penalty. That the element of intention to evade payment of duty also has to be established. It is the case of appellant as there is no case for the department that the appellant removed the goods clandestinely, there is no intention to evade payment of duty. For better appreciation, Rule 25 of the Central Excise Rules, 2002 is noticed as under:- Rule 25. Confiscation an .....

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ction or storage of any excisable goods without having applied for the registration certificate required under section 6 of the Act, or (d) contravenes any of the provisions of these rules or the notifications issued under these rules with intent to evade payment of duty, then, all such goods shall be liable to confiscation and the producer or manufacturer or registered person of the warehouse [or an importer who issues an invoice on which CENVAT Credit can be taken] or a registered dealer, as t .....

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hillai Conductors (P). Ltd. Vs. CCE-Raipur, 2000 (125) ELT 781 (Tribunal) and argued that confiscation and imposition of penalty is not attracted by mere non-accountal of goods. That simple failure to maintain the accounts without intention to evade the duty will not attract the Provisions of Rule 25 of Central Excise Rules, 2002. I do agree that the Tribunal in the said case had held that in the absence of the element of mens rea, confiscation and imposition of penalty is not sustainable. The c .....

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hould be able to give a plausible explanation for such non-accounting. In Pepsi Foods Vs. CCE-Chandigarh, 2002(139) ELT 658 (Tri-Del), the non-accountal was sufficiently explained by the assessee. The Tribunal therein observed that Rule 173Q cannot take in an accounting failure simplicitor and held in favour of the assessee. Failure to account goods or raw material may be due to different reasons. There may be instances where the person incharge of accounts is on leave or change of management et .....

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re found in loose papers. From the totality of facts and evidence presented by the case, the intention to evade payment of duty can be safely inferred. In the show cause notice para 9, it is stated as below: the unaccounted goods found in their premises were stored unaccounted with an intention of clandestine removal as appeared in their documents resumed and confront with Shri Neeraj Khattar during his statement dated 10/3/2011 9. In view thereof the contention of the appellant that there is no .....

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