The Customs, Excises, and Service Taxes Appellate Tribunal (CESTAT), Delhi bench reiterated that raw material is not liable to confiscation under Rule 25 of Central Excise Rules, 2002.
The appellant M/s Sky Alloys & Power Pvt. Ltd. are engaged in the 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 noticee 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 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 appellant has urged that the shortage is noticed in the single day production procedure of the appellant when it was yet to be entered in the records. There is no such allegation that the records were not maintained by the appellant for a quite a long period. It is mentioned that there is no other evidence to corroborate the impugned allegations of clandestine removal since the excess finished goods were not for more than one day‟s production. The non-entry of that day’s production in record cannot result in imposition of penalty.
It is submitted that the original Adjudicating Authority has specifically acknowledged that present is not the case where the raw material should be ordered confiscation. But despite forming the said opinion, the proposal of show cause notice has been confirmed. The Commissioner (Appeals) has also erred in not recognizing that the raw material was of one day production only and there was no removal of any excisable goods from the appellant’s premises.
While rebutting these arguments, the Departmental Representative has mentioned that in terms of Rule 10 of Excise Rules, it is the mandate that proper records shall be maintained on a daily basis in a legible manner. Since the daily stock account was not maintained by the appellant, there is a defined contravention of said Rule 10. In consequence whereof, Rule 25 permits confiscation and imposition of a penalty. It is impressed upon that there is no infirmity while endorsing the Rule 25 (1) (b) of Central Excise Rules while for the confiscation of 56.300 MT of MS Ingots and 221.693 MT of Iron Ore.
The two allegations were leveled against the appellant in the show cause notice is that the appellant was not accounting the raw material and the manufacture of excisable goods in their daily stock and appellant was removing the same without payment of central excise duty.
The coram of Judicial Member, Rachna Gupta held that neither the MS Ingots nor Iron Ore is liable for confiscation, and penalty cannot be imposed.
“It is otherwise apparent from the 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 brought any such evidence which may prove their allegations. In the absence thereof, however, in view of the acknowledgment 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,” the ITAT said.
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