JUDGEMENT
P.G. Chacko, Member (J) -
(1.)THE appellants are engaged in the manufacture of textile articles including 'baby receiving blankets'. They have two units viz. Units I & II, which are covered by common Central Excise registration. Prior to 13.5.2003, these units were 100% EOUs covered by common registration. When the EOUs were de -bonded under Final Exit Order dated 13.5.2003 of the Development Commissioner, there was a stock of 5869.7 Kgs. of baby receiving fabric (semi -finished goods) in Unit - I, which was not declared in the 'ER - I' Return filed by the appellants in the month of May 2003. It was only on 4.9.2003 that the officers of Central Excise, who visited the factory, found the above stock. On the basis of their finding, the Department issued a show -cause notice for confiscating the above stock of goods and imposing penalty on the party under Rule 25 of the Central Excise Rules, 2002. These proposals were contested. In adjudication of the dispute, the Commissioner ordered confiscation of the aforesaid quantity of baby receiving fabric valued at Rs. 12,91,334/ -, under Rule 25 ibid with option for redemption against payment of fine of Rs. 1.3 lakhs. He also imposed a penalty of Rs. 50,000/ - on the appellants under the same Rule. Hence the present appeal.
(2.)AFTER hearing both sides and considering their submissions, I find that, admittedly, the above fabrics were in semi -finished condition and were not fit for removal as final product (baby receiving blankets). Rule 25, invoked by the Commissioner, reads as under:
Rule 25. Confiscation and penalty. - - (1) Subject to the provisions of Section 11AC of the Act, if any producer, manufacturer, registered person of a warehouse or a registered dealer, -
(a) removes any excisable goods in contravention of any of the provisions of these rules or the notifications issued under these rules; or
(b) does not account for any excisable goods produced or manufactured or stored by him; or
(c) engages in the manufacture, production or storage of any excisable goods without having applied for the registration certificate required under Section 6 of the Act; or
(d) contravenes any of the provisions of these rules or the notifications issued under these rules with intent to evade payment of duty,
then, all such goods shall be liable to confiscation and the producer or manufacturer or registered person of the warehouse or a registered dealer, as the case may be, shall be liable to a penalty not exceeding the duty on the excisable goods in respect of which any contravention of the nature referred to in Clause (a) or Clause (b) or Clause (c) or Clause (d) has been committed, or [rupees two thousand], whichever is greater.
(2) An order under Sub -rule (1) shall be issued by the Central Excise Officer, following the principles of natural justice.
In the absence of removal of the fabric by the appellants, Clause (a) of Sub -rule (1) of Rule 25 was not applicable to the case. Admittedly, the appellants never cleared the semi -finished goods from their factory. They had ever cleared only the finished goods (blankets) from their factory. Hence it was not necessary for them to maintain an account of the semi -finished goods. For this reason, Clause (b) of Sub -rule (1) was also not applicable. The Department has never had a case that the appellants had engaged in the manufacture or storage of the fabrics without obtaining registration certificate, nor was it alleged that the appellants contravened any of the provisions of the Central Excise Rules, 2002 with intent to evade payment of duty. In these circumstances, Clauses (c) & (d) of Sub -rule (1) were also not applicable. The entire rule stood inapplicable to the case. Hence the confiscation ordered and penalty imposed under Rule 25 have only to be set aside. Accordingly, the impugned order is set aside and this appeal is allowed.
(Dictated and pronounced in open court)
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