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May 6, 2021

Excess stock of finished goods lying in factory cannot be confiscated

by Mahesh Mara in GST, Legal Court Judgement

Excess stock of finished goods lying in factory cannot be confiscated

Fact and Issue of the case

The appellant M/s Sky Alloys & Power Pvt. Ltd. are engaged in manufacture of Sponge Iron, MS Ingots and Silico Manganese. Their premises were got searched on 7 November 2015 and 8 November 2015 by the team of Preventive Officers of Central Excise, Customs and Service Tax acting upon the intelligence gathered about evasion of central excise duty by the appellant by way of procurement of unaccounted raw materials, clandestine manufacture of excisable goods without accounting the same in their daily stock account and removing the same without payment of central excise duty. The documents were recovered during the search and the investigating team also got stock of finished goods and raw material during the physical verification. While comparing the said physical verification report and the documents recovered with the opening stock finished goods and the raw material declared by the notice the team noticed that 56.300 MT of MS Ingots and 221.693 MT of Iron Ore is excess/ unaccounted stock in the factory premises. Resultantly a show cause notice No. 3976 dated 3 May 2016 was served upon the appellants proposing the seized MS Ingots and the Iron Ore to be confiscated alongwith the proposal of imposition of penalty. The said proposal was initially confirmed vide order-in-original No. 20/ADJ/AC/RGH/C.Ex/2018-19 dated 15 January 2019. The appeal thereof has been dismissed vide order-in-appeal No. BHO-EXCUS-002-APP-40-19-20 dated 24 June 2019. Being aggrieved the appellant is before this Tribunal.

Observation of the Tribunal

Relying  upon  the  case  of  Commissioner  of  Central Excise, Aurangabad versus Gal Aluminium Extrusions Pvt. Ltd. – 2011 (274) E.L.T. 582 (Tri. – Mumbai) it has been held in order-in-original para 8.12 that raw material is not liable to confiscation under Rule 25 of Central Excise Rules, 2002. Despite these findings surprisingly Assistant Commissioner has confirmed the proposal of confiscation of 56.300 MT of MS Ingots and 221.693 MT of Iron Ore, however, penalty on said quantity of Ingots was not imposed upon nor the order with respect to Iron Ore was passed.

There was no better evidence before Commissioner (Appeals) than it was before Assistant Commissioner. Commissioner (Appeals) has held that the verification of stock of Ingots was conducted in presence of the Authorized Signatory of the appellant, who neither had objected the method of physical verification nor made any complaint. He had rather admitted the same and also in the excess stock of 56.300 MT of MS Ingots valued at Rs. 11,09,110/-. The statement of said Authorized Signatory Shri Kumar Chakraborty is perused. It shows that there is no admission for the alleged excess stock. None as his answers recorded in the statement amount to admission except that “no satisfactory reason has been cited” is alleged against said Shri Chakraborty. Such kind of statement cannot be called as admission neither of guilt nor of the modus operandi of the investigation. No doubt there is no retraction as in impressed upon by the Department, but once there is no admission retraction is not required. It is otherwise apparent from record that the appellant requested for the opportunity of cross-examining the witnesses the said opportunity has been denied cross examination is the basic rule of ensuring fair trial the denial thereof in the case which lacks any cogent evidence adversely affects the Department.

Department has not bring for any such evidence which may prove their allegations. In absence thereof, however, in view of the acknowledge that the notice shortage is just of one day production even if recording as required under Rule 10 is missing, but the same does not warrant the application of Rule 25 (1) (b) of Central Excise Rules, 2002. As already discussed on the basis of the above cited case law, as a result, the court is of the opinion that neither the MS Ingots as well as the Iron Ore are liable for confiscation nor present is the case of imposition of penalty. As a result of entire above discussion order under challenge is hereby set aside.

Conclusion

The Appeal stands allowed. Neither the MS Ingots as well as the Iron Ore are liable for confiscation nor present is the case of imposition of penalty. As a result of entire above discussion order under challenge is hereby set aside.

Read the order from below

Excess-stock-of-finished-goods-lying-in-factory-cannot-be-confiscated

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