In M/s Anil Enterprises v. CCE, the Customs, Excise, and Service Tax Tribunal ( CESTAT ) ruled that non-accounting of raw materials would not attract penalty since the Assessee is not the manufacturer or dealer or availed any benefit out of such material.
The assessee in the instant case is a small scale unit engaged in the manufacture of DVD players. During the verification period, it was found that raw materials valued at Rs. 4,87,749 and finished goods valued at Rs. 1,08,900 and the same were not duly accounted in the books of accounts of the Assessee. Therefore such goods were seized for further action. Subsequently penalty under Rule 25 of Central Excise Rules, 2002 was imposed on the Assessee.
On appeal, the lower authority confirmed the penalty and upheld the order passed by the AO. Thereafter the Assessee approached the Tribunal on further appeal against the order passed by the authority.
Before the Tribunal, the counsel for the Assessee Advocate V.R. Sethi submitted that there is no provision to confiscate raw material as none of the requirements of Rule 25 are fulfilled for such confiscation. The Original Authority clearly recorded that the raw materials were not manufactured goods of the Assessee. They were procured by them. There is no irregularity linking the raw material to any clandestine manufacture of non-duty paid clearances. As such, he submitted that the seizure and confiscation of raw material are without the authority of law.
After analyzing the above-narrated facts and circumstances, Technical Member B. Ravichandran observed that the Original Authority categorically records that the raw material seized were not manufactured by the appellant nor they have availed any Cenvat credit on the said raw materials. However, he proceeded to confiscate the goods under Rule 25 only on the ground that duty paid nature of the raw material has not been established by the document.
The Tribunal further held that while perusing the materials on records it is clear that the Assessee is not the manufacturer or dealer or availed any benefit out of such material. Therefore, the appellant was not liable to pay duty on the goods manufactured by using such raw material as they were enjoying SSI exemption.
While concluding the issue the Tribunal also observed that Rule 25 for raw material is not justified in the present case. Hence the seizure and confiscation of the raw materials are not sustainable.
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