No Penalty Imposed Merely because the Stock of Finished Goods Found In Factory Without Entry: CESTAT [Read Order]

The New Delhi Bench of the Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ) has held that penalty should not be imposed merely because the stock of finished goods is found in a factory without entry.    

The appellant Sharma Steel Rolling Mills challenged the order in which the Commissioner (Appeals) upheld the confiscation of seized and upheld the penalties of Rs. 5,00,000/- (Rupees five lakh only) and Rs.2,50,000/- (Rupees two lakh and fifty thousand only) imposed on M/s. Sharma Steel Rolling Mills.

During the visit of the Central Excise officers at the premises of M/s Sharma Steel Rolling Mills stock of 34.95 MT of MS ingots valued atRs.11,14,905/- and 181.355 MT of MS Angles valued at Rs.64,92,509/- was allegedly found in excess to the recorded stock. 

The Central Excise officers alleged that the excess stock was kept unaccounted for with the intent to clear without payment of Central Excise duty.  Hence, the same was seized under the relevant provisions.  Consequent to the seizure, a show cause notice was issued, proposing confiscation of the seized goods under Rule 25(1)(b) of the Central Excise Rules, 2002 (‘the Rules’) and imposition of penalty under Rule 25(1)(b) of the Rules on appellant no.1 and penalty under Rule 26(1) of the Rules upon the appellant.  The Original Authority adjudicated the notice, and the Commissioner (Appeals) upheld the Order-in-Original vide the impugned order.

The Counsel contended that no penalty can be imposed under Rules 25 and 26 of Central Excise Rules, 2002 unless mala fide intention towards clandestine removal of excess goods is shown.  

It was found that the stock estimation had been done merely by the eye estimation method.  Considering the fact that the officers of Anti-Evasion started search/investigation proceedings whichlasted for 3 hours and 45 minutes.   The Counsel submitted that it was nowhere mentioned in the Panchnama as to how officers of Anti-Evasion measured the entire quantity of M.S. Ingot, M.S. Channels and M.S. Angles whose total quantity is 798.100 (MT). 

that excess quantity of MS Ingots and MS Angles were found which had not been entered in the statutory books, which is liable for penalty.  However, other than the statement, no other corroborative evidence has been brought on record to show that there was an intent to evade. There is also no evidence brought out to establish that appellant No.1 had indulged in similar evasion earlier

It was observed that the Tribunal in the case of Nilesh Steel & Alloy Private Ltd Vs Commissioner of Central Excise, observed that a penalty should not have been imposed merely because the stock offinished goods is found in the factory without entry into the production registerespecially when there is no evidence of clandestine removal. 

A single-member bench of Ms Hemambika R Priya, Member (Technical) set aside the impugned orderand allowed the appeal.

To Read the full text of the Order CLICK HERE

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