Judgment:
1. This appeal is directed against the Order-in-Appeal dated 17-2-2004 wherein confiscation of the finished goods and raw material have been upheld with an option to redeem the same on payment of redemption fine and penalty was also imposed on the appellants.
2. The relevant facts that arise for consideration are that the appellants' factory was visited by the officers of the Central Excise department on 9-9-2002 and they found the stock of finished goods as well as HDPE granules i.e. inputs in excess of the recorded balance in their statutory records. The officers seized the excess goods and a show cause notice was issued asking them to show as to why these goods should not be confiscated and penalty be not imposed on them. The appellants contested the show cause notice. The adjudicating authority in his order-in-original dated 29-8-2003 confiscated the excess goods found with an option to redeem the same on payment of redemption fine and also imposed a penalty on the appellants. On appeal, the appellate authority upheld the order-in-original without any relief to the appellants. Hence, this appeal.
2. Learned Advocate for the appellants submits that the confiscation of the goods is wrong. He submits that the excess goods which were found in the factory premises were still under process and the same were not entered in RG-1 register due to the fact that these goods were manufactured on earlier date. In respect of the raw material he submits that these goods were inputs and they were lying in their factory due to the fact that their sister concern adjacent to their factory were having some problem and these goods were stored in their factory premises. He submits that there is no allegation in the show cause notice of any intention to remove the finished goods without payment of duty. Hence he relies upon the decision in the case of Bhilai Conductors' case as reported in 2000 (125) E.L.T. 781. In respect of his submission that the raw material which were found in excess are not liable for confiscation and in support of his contention he relies upon the decision in the case of CCE, Indore v. Avanti LPG India Ltd. .
3. Learned D.R. on the other hand submits that the appellants are working under SRP. The duty is caste upon the appellants for the goods purchased, manufactured and cleared by them in the statutory records.
Failure of accountal of these goods in the statutory record gives rise to presumption that there was always an intention to remove the goods without payment of duty. He further submits that the provisions of Rule 25 have been enacted to consider these kind of violation by the appellants and the goods have been correctly confiscated. He also submits that once the goods which are produced and ready in all respect, if not accounted in the statutory record, inference is nothing but an intention to remove the goods without payment of duty. He relies upon the decision of the Division Bench of this Tribunal in the case of Media Video Ltd. v. CCE, New Delhi 4. Considered the submissions of both sides, perused the record. I find that the order-in-original as well as order-in-appeal has been passed for confiscation of the goods of the finished goods found in excess and in respect of raw material found in excess in the factory premises of the appellants. In respect of the finished goods I find that the appellants have been continuously taking a plea before the lower authorities that these goods were not yet completely finished and goods still have to attain the RG-1 stage. The appellants have also been continuously taking a plea that there was no intention to remove the goods but it was an error on their part of not entering into the statutory record. This in my opinion may be correct, given the fact that the quantity of finished goods were not that very high. The Tribunal in the case of Bhilai Conductors (supra) in an identical issue has held as under : Confiscation not attracted by mere non-accountal of goods in RG1 when there is no evidence that such non-accountal of goods still in the factory was with intent to evade payment of duty - Rule 173Q being a penal clause intention in-built in it and hence mens rea an essential ingredient to attract this clause - Rule 173Q(1)(b) of Central Excise Rules to be read in conjunction and not in isolation with other provisions of Rule 173Q.I find from the show cause notice issued to the appellants in the present case that there is no allegation to remove the goods from the factory without payment of duty. In the absence of any such allegation in the show cause notice it cannot be considered or presume that the appellants had intention to remove the goods without payment of duty.
In the case of Media Video Ltd. regarding non-accountal of the goods, relied upon by the learned SDR, I observe, that, in that case the appellants therein was having precedence of removal of goods clandestinely without payment of duty and this was corroborated in that case. This particular fact had made the Tribunal to take a different view than the Bhilai Conductor's case, (supra).
5. In respect of raw material found in the appellants' factory there is no allegation in the show cause notice that these goods were, in fact, produced or manufactured by the appellants. The goods which were found were granules which are used as inputs by the appellants for manufacturing planks, drums in their factory. Since these are inputs the question of their confiscation does not arise as held in the case of CCE, Indore v. Avanti LPG India Ltd. (supra). In the said case the Tribunal has held as under : Raw material for manufacture of LPG found in excess - Confiscation ordered under Rule 209(1)(b) of erstwhile Central Excise Rules, 1944 - Respondents neither producer nor registered person or a registered dealer but merely user of said goods - Consequently goods cannot be called excisable goods in terms of Section 2(d) of Central Excise Act, 1944 - Goods received after due discharge of duty, thus, cannot come under category of excisable goods - Rule 209(1)(b) ibid not applicable.
6. In view of the above finding that the confiscation of the finished goods and the raw material is not in connoscence with law and the same is set aside. Penalty imposed on the appellants under Rule 25 is also not warranted and the same is also set aside. But at the same time I find that the appellants have violated the provisions of Rule 10 of the Central Excise Rules, 2002 for which they are liable to be penalized under Rule 27. A penalty of Rs. 2000/- on the appellants under Rule 27 is imposed for violation of the Rules. Appeal is disposed of in above terms.