The Delhi Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that penalty cannot be imposed in absence of confiscation of goods.
The bench of Justice Dilip Gupta (President) and P. V. Subba Rao (Technical Member) has observed that the pre-requisite for imposing penalty under Rule 26 is confiscation of the goods and the person being concerned in any manner with such goods.
Table of Contents
Background
The appellants/assessees is in the business of manufacture of Steel shots/grits and CI Shots/Grits and is registered with the central excise. It also avails CENVAT credit on its inputs and input services.
The officers of the Directorate General of Central Excise Intelligence received intelligence that the assessee was evading duty by under-reporting production and removing the quantity so under reported without paying duty.
The officers of DGCEI visited the premises of the assessee, examined their records and took stock of the goods physically available. While the work-in-progress records showed 951.646 MT as the WIP, the actual quantity of goods in the semi-finished state was only 70 MT. Thus, there was a shortage of 882 MT of semi-finished goods (or WIP).
The assessee maintained inventory of raw material; finished products; and Work In progress (WIP). No discrepancies were found in the raw material and finished products but huge shortages were found in the WIP.
Since the semi-finished goods (WIP) will with time, become finished goods, the demand is of duty on shortage of semi-finished goods treating them as finished goods.
Duty has been demanded and confirmed invoking extended periods of limitation under section 11A(4) along with applicable interest under section 11AA and mandatory penalty under section 11AC.
The assessee filed appeals to assail the Order passed by the Commissioner Customs and Central Excise, Raipur by which he decided the proposals made in the Show Cause Notice and confirmed duty demand under section 11A(4) of the Central Excise Act, 1944 along with interest under section 11AA and imposed a penalty of equal amount under section 11AC.
The department refrained from confiscating goods under Rule 25 of the Central Excise Rules, 2002 but imposed a penalty under Rule 26.
The assessee is assailing in its appeal the confirmation of duty along with interest and imposition of penalty under section 11AC. The appellants contested the imposition of personal penalty under Rule 26.
Read More: INDIRECT TAX WEEKLY FLASHBACK: 29 SEPTEMBER TO 5 OCTOBER 2024
Arguments
The assessee contended that generation of dust in the process of the manufacture of their final products is inevitable. Since 2008, the appellant used the dust to fill pits and dumped it on the roadside, etc. The demand was confirmed based on assumptions and presumptions without any evidence.
The department contended that the charge of clandestine removal is based on the WIP register maintained by the appellant itself. It is not based on any other third party data.
The department contended that analysis of this register revealed that there is a direct correlation between the raw material, work in progress and the finished goods. The quantity shown as consumed in the WIP register is the quantity of the final product that will be produced and all production losses have been taken into account.
Relevant Provisions – Penalty Subject To Confiscation Of Goods
Rule 26 of the Central Excise Rules, 2002 is in respect of the penalty for certain offences. Any person who acquires possession of, or is in any way concerned in transporting, removing, depositing, keeping, concealing, selling or purchasing, or in any other manner deals with, any excisable goods which he knows or has reason to believe are liable to confiscation under the Act or these rules, shall be liable to a penalty not exceeding the duty on such goods or two thousand rupees, whichever is greater.
Conclusion
The court has held that the Commissioner dropped the proposal to confiscate the goods. Therefore, Rule 26 cannot apply.
FAQs
What is confiscation of goods?
The term Confiscation means is a legal form of seizure by a government or other public authority.
Can penalty be imposed without confiscation of goods?
The Delhi Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) in the case of Pankaj Tekriwal Versus Commissioner Of Central Excise has held that penalty cannot be imposed in absence of confiscation of goods.
Case Details
Case Title: Pankaj Tekriwal Versus Commissioner Of Central Excise
Case No.: Excise Appeal No. 50174 Of 2016
Date: 04/10/2024
Counsel For Appellant: Bipin Garg
Counsel For Respondent: Unmesh Kumar
