Customs, Excise and Gold Tribunal - Delhi
Cce vs Magnum Steels Ltd. on 9 December, 2005
Equivalent citations: 2006(107)ECC628, 2006(108)ECC628, 2006(110)ECC628, 2006ECR628(TRI.-DELHI), 2006(197)ELT572(TRI-DEL)
ORDER K.C. Mamgain, Member (T)
1. These two appeals have been filed by the Revenue. The issue involved in both the appeals is common, hence these are being taken up together for decision under this common order.
2. In Appeal No. E/1088/2004-NB (SM), the facts in brief are:
The Central Excise officers visited the premises of M/s. Magnum Steel Ltd. on 7.2.2002 and after physical verification of the stock of finished goods, excess quantity of the 48.200 MT of Twisted Bars and 51.21 MTs. of Flats was found than the recorded balance in daily production register. On inquiry, the representative of the manufacturer explained that the excess goods found on verification was due to incorrect accounting of the stock in register. After issue of the show cause notice, the original authority confiscated the seized goods and allowed the same to be redeemed on payment of a fine of Rs. 3 Lakhs and also imposed a penalty of Rs. 2 Lakhs on M/s. Magnum Steels Ltd. On appeal, the Commissioner (Appeals) under the impugned order set aside the confiscation of goods and reduced penalty to Rs. 10,000/- (Rupees Ten Thousand Only).
3. In Appeal No. E/1092/04-NB (SM), the facts are that on 7.9.2001, the central excise officers visited the factory of M/s. Magnum Steels Ltd. and on physical verification of the stock with their daily production register, they found an excess stock of goods valued at Rs. 2,59,012/-. The representative of M/s. Magnum Steel Ltd. stated that they are keeping the records not by physical weighment but on the basis of use of the raw materials. The goods found in excess were seized for which show cause notice was issued and the case was adjudicated by the Dy. Commissioner, who confiscated the goods but allowed these to be redeemed on payment of a fine of Rs. 30,000/- and imposed a penalty of Rs. 15,000/-. The Commissioner (Appeals) under impugned order set aside the confiscation of goods and reduced penalty to Rs. 10,000/- (Rupees Ten Thousand Only).
4. On behalf of the Revenue, it was pleaded that the respondents have not accounted for the goods found in excess in their daily production record. The excess has been accepted by the representative of the respondents in the statements recorded at the time of seizure of the goods. Even though, there is no direct evidence that they were preparing to remove the goods, however, non-accountal of excess goods makes these liable for confiscation under Rule 25 of the Central Excise Rules, 2001. For confiscation of goods, mens rea is not required. Reliance was placed on the decision of Bombay High Court in the case of Kirloskar Brothers Ltd. v. Union of India and Ors. 2002 (83) ECC 497 (Bombay), where it was held that the question whether one had intention to evade payment is a question of fact. Secondly, Clauses (a), (b) and (c) of Sub-rule (1) of Rule 173Q do not admittedly use the expression "with intent to evade payment of duty", which is found in Clause (d) thereof. It can, therefore, be prima facie, assumed that the liability in terms of Rule 173Q(1) Sub-clauses (a), (b) and (c) does not depend upon mens rea. Reliance was also placed on the decision in the case of International Engg. & MFG. Services P. Ltd. v. CCE, Jaipur reported in 2001 (135) ELT 551 (Tribunal-Delhi), where it was held that the seized goods were the goods manufactured by the appellants and these were not entered into statutory records. Rule 173A(1)(b) provides for confiscation of excisable goods which are not accounted for. The appellants have, in the past, removed the goods without discharging duty liability. Therefore, confiscation of seized goods is upheld. Reliance was also placed on the decision in the case of CCE, Indore v. Caps & Caps (P) Ltd.
5. It was pleaded for respondents that the excess quantity found in the factory than the recorded balance is due to the fact that the appellants are not weighing the quantity of actual production but they are working it out theoretically on the basis of raw material used for manufacture of these quantities and then, writing the weight. When the goods are actually sold then the actual weighment is done and duty is accordingly paid. It was pleaded that this has caused difference in weight. The respondents have no intention to remove the goods without payment of duty. No case of removal of goods without payment of duty was detected against them. Therefore, confiscation of the goods for non-accountal is correctly dropped by the Commissioner (Appeals). The penalty for non-accountal as upheld by the Commissioner (Appeals) is not being contested by the respondents.
The ld. Advocate relied on the following case laws:
(1) Reliance Industries v. CCE, Surat-I where it was held that "when goods allegedly manufactured have been kept in bonded store room in the licensed premises, the non-accountal thereof in the production records, viz. RG-I, would only be a technical/clerical omission and not a substantial violation to call for ordering confiscation."
It is also pointed out that in this case the distinction has been made between Bhillai Conductors and Kirloskar Brothers case. The fact of a non-duty paid removal of excisable goods read with non-accountal is not a case of a simplicitor non-accountal.
2. CCE, Rajkot v. Bhajrang Industries Where it was held that "non-accountal of goods in RG-I register - basic records such as bill book, receipt book, purchase register, etc. found at the time of search itself and expressly placed under seizure No material of clandestine non-duty paid removal found along with alleged non-accountal in production report - Confiscation and penalty are not sustainable".
(3) Rathi Super Steel Ltd. v. CCE, Ghaziabad 204 (175) ELT 180 (Tribunal-Delhi) where it was held that "it is not in dispute that neither of the lower authorities found mens rea against the appellants whether in respect of alleged non-accountal of raw material or alleged non-accountal of finished goods, nor was there anything in the show cause notice to indicate that the department had a case that the appellants had deliberately indulged in non-accountal with intent to remove the goods clandestinely without payment of duty. In the absence of mens rea, the confiscation and penalty cannot be sustained in respect of the finished goods.
6. I have considered the submissions made by both the sides. I find that there is no dispute that the goods found in excess at the time of seizure were not accounted for in the RG-I register. The main argument of the Revenue is that for confiscation of the goods, mens rea is not required and non-accountal simplicitor is enough for confiscation of the goods. The respondent's claim is that non-accountal of the goods is not enough for confiscation as they have neither removed the goods without payment of duty nor they had any intent to remove the goods without payment of duty. The goods were found inside the factory. No instance of removal of goods without payment of duty has been mentioned in the show cause notice. The reason for non-accountal is that the weight of the goods manufactured is recorded on an approximate basis but when the goods were cleared and entries were made in RG-I register, it is based on the actual weight, which created a difference. Since the respondents have no intention to remove the goods and they have been penalized for non-accountal, confiscation should not be warranted.
7. On examining, I find that under Clause (b) of Sub-rule (1) to Rule 25, the goods are liable for confiscation if the producer or manufacturer does not account for any excisable goods produced or manufactured or stored by him. In both the cases, the manufacturer has explained the reason that there is excess of the goods as compared to the physical stock and that is because of not taking the weight by physical weighment. This explanation cannot be accepted. If this explanation is accepted then there will always be irregular maintenance of the records and true position will never be known to the Department leaving scope for clandestine clearances. On two occasions, the Department has been able to point out that the substantial quantities of the goods were not accounted for. There are case laws relied upon by both the sides supporting each others point of view. I find that the Commissioner (Appeals) had lifted the confiscation following the decisions in case of Bhilai Conductors. In that case, the goods were kept inside for some tests or for some examination before they could have been entered in the RG-I Register and there was a proper explanation for such type of situation. Even in case of Reliance Industries, the goods were kept inside the bonded store room and explanation was given for non- accountal of these goods but in the present case, it is not at the one occasion but at the two occasions, the explanation was given is that they are recording the theoretical weight based on weight of raw material issued for manufacture of goods. Such situation will lead to improper maintenance of records. Therefore, it cannot be taken lightly. The goods have to be confiscated so that the respondents may take due care in future for proper maintenance of the records. Under the Clause (b) of Rule 25 (1) of Central Excise Rules, 2002, mens rea is not required for confiscation of the non-accounted goods. Therefore, I set aside the order of the Commissioner (Appeals) as far as dropping of confiscation of goods and redemption fine is concerned. I uphold the order of original authority for confiscation of the goods and allowing goods to be redeemed on payment of redemption fine. However I reduce redemption fine in Appeal No. 1088/2004-NB (SM) to Rs. 1 Lakhs (Rupees One Lakh Only) and in case of Appeal No. E/1092/2004-NB (SM) to Rs. 15,000/- (Rupees Fifteen Thousand only). The penalty imposed by the Commissioner (Appeals) is upheld in both the appeals.
8. Both the appeals of the Revenue are partly allowed.
Order dictated & pronounced in open Court on 9.12.2005.