Customs, Excise and Gold Tribunal - Delhi
Upper Doab Sugar Mills Ltd. vs Collector Of Central Excise on 10 February, 1987
Equivalent citations: 1990(47)ELT16(TRI-DEL)
ORDER
G. Sankaran, Vice-President
1. The captioned appeal at S.No. 1 was originally filed as a Revision Application before the Central Government against order of C.B.E.C. mentioned above. On the setting up of this Tribunal the Revision Application was transferred to it in terms of Section 35P of the Central Excises and Salt Act, 1944 to be disposed of as if it were an appeal filed before the Tribunal. Appeal at S.No. 2 is a sequel to the order of the Collector of Central Excises, Meerut, also mentioned above.
2. The facts relating to Appeal No. 734/81-D, briefly stated, are that M/s. Upper Doab Sugar Mills Ltd. Shamli, (hereinafter the "appellants") are engaged in the manufacture inter alia of molasses. By the Finance Bill (2) of 1980, a specific entry was inserted in the First Schedule (hereafter "CET") to the Central Excises & Salt Act, 1944 (hereafter the "Act"), for molasses (item No. 15 CC). It appears that appellants made a (false, according to the department) declaration filed by them of the stock of molasses held by them on 17-6-1980, the day preceding the Budget day) by showing 'nil' stock of molasses on hand. On 10-7-1980, the Central Excise staff found 31,844.70 Qtls. of molasses in the factory premises of the appellants although the balance of molasses available in the factory was "nil" as per the appellant's record. The staff also found that the appellant had removed 7,302.25 Qtls. of molasses during the period from 19-6-1980 to 9-7-1980 to Shamli Distillery and Chemical Works, Shamli, without assessing and paying the excise duty leviable thereon. A notice dated 22-12-1980 was issued to the appellants asking them to show cause why penalty should not be imposed on them under Rules 9(2), 52A, 173Q and 223B of the Central Excise Rules, 1944 (hereinafter "the rules" and why duty amounting to Rs. 23,002.09 leviable on 7,302.25 Qtls. of molasses removed (as aforesaid) should not be demanded under Rule 9(2) and why the 31,844.70 Qtls. of molasses should not be confiscated under Rule 173Q and 223B. In defence, the appellants contended that the ownership of the molasses had already changed hands before the Budget day although the goods continued to physically remain in the same storage tanks. The transfer of ownership was stated to have been effected under excise (not Central Excise) gate passes. The transfer of ownership would amount to removal for the purpose of Central Excise law. Further, the goods were exempt before the budget and so were not dutiable even after the budget. In due course, the Collector of Central Excise, Meerut, passed an order on 3-7-1981 directing the appellants to pay duty on the 7,302.25 Qtls. of molasses removed during the period from 19-6-1980 to 9-7-1980 and the 31,844.70 Qtls. referred to above. He also confiscated the stock found in the factory premises but allowed an option to the appellant to redeem them on payment of a fine of Rs. 25,000. No penalty was, however, imposed on the appellant. The Collector held that book transfer of the stock to the distillery though the stock physically continued to remain in the appellant's factory premises did not amount to removal for Central Excise purposes. Therefore, the appellants should have declared the stocks on hand as also paid duty on the removals between 19-6-1980 and 17-7-1980. It was not correct that molasses were exempt from duty before the 1980 budget. The goods were liable to duty under Item No. 68 CET. They were exempt if captively consumed but the exemption was subject to conditions. They were hot unconditionally exempt. Therefore, the appellants were liable to pay duty on the quantities found in stock as well as on the goods removed, as aforesaid. The appellant's case before the Collector as well as the Central Board of Excise and Customs was that, as per prevailing practice, there used to be book transfer of molasses to their sister concern viz. the distillery on a particular date without actual transfer of molasses because the distillery did not have any molasses storage tanks and, therefore, they used to account for the transfer of molasses in the books of both the factory and the distillery and actually transferred the goods in small consignments as and when required by the distillery. The same thing had happened in this case and they had actually accounted for the transfer of all their molasses on 14-3-1980 and reported 'nil' balance not only in the RG-1 but also in the RT-2s., which were duly assessed and approved by the Jurisdictional Supdt. of Central Excise.
Accordingly, it was claimed that although the goods were physically present in the factory of the appellants, the ownership had already been transferred to the distillery and the goods were sent to the distillery in small consignments as and when required, with the full knowledge and consent of the Jurisdictional Central Excise Officers as well as the State Excise Officers who were exercising control over the storage and sale of molasses under the State Excise Law.
3. In its order-in-appeal dated 30-10-1981, the Board held that, in terms of Rule 9A(i)(ii), the rate of duty applicable in the present case would be as applicable on the date of actual removal of the excisable and dutiable goods from the factory of manufacture, whatever might have been the "established practice" in the factory in the matter of transfer of ownership of the goods and book adjustment. In this view, the Collector's order demanding duty under Rule 9(2) was confirmed by the Board. With regard to the confiscation of the goods and fine imposed for their redemption, the Collector was directed by the Board to examine the appellant's contention that the aforesaid practice was within the knowledge of the department and was not objected to by the departmental officers prior to the booking of the present case, and if this was so, the Board observed that there should not be any confiscation and necessary relief in the matter should be granted by the Collector.
4. In pursuance of the Board's order, the Collector has held adjudication proceedings and passed an order on 3-10-1986, holding that the appellants had not established that the Central Excise officers had consented to the practice of book transfer of molasses from the appellant to the distillery and corresponding entries in the Central Excise register RG.l. Appeal No. 2575/86-D is against this Order of the Collector.
5. Since the two matters are interlinked, the two appeals were taken up for hearing together.
6. We have heard Shri Jaswant Singh, Consultant for the appellants and Smt. Dolly Saxena, Sr. D.R. for the respondent.
7. Shri Jaswant Singh submitted for the appellants that the practice of book transfer had the sanction of the state excise authorities. He drew our attention to Gate Pass No. 666 (Book No. 14) dated 14-3-1980 (p. 72 of the appellant's paper book), showing the transfer of 18,554.50 Qtls. of molasses from the appellants to the distillery and the State Excise inspector's endorsement thereon signifying receipt of the molasses by the distillery. At page 73 of the paper book is an extract from the stock register bearing the signature dated 17-6-1980 of the Asstt. Excise Commissioner (molasses), Central Zone, Bareilly. The extract shows the actual stock as nil. However, in response to a query from the Bench, the Consultant fairly stated that there was no record of the appellants having informed in writing the Central Excise officers that there was only book transfer of molasses from the appellants to the distillery, the physical removal, taking place only later in convenient lots to the distillery. It was, however, submitted that the pre-budget stock was verified by the Central Excise department and certified to be 'nil'. When we enquired whether there was any evidence in this behalf, the consultant could only say that the RG.l register was with the Collector and it might be summoned. We do not consider this necessary. If the Central Excise officers had certified the stock as nil after due verification, that would have been a clinching piece of evidence in favour of the appellants and we cannot imagine that the appellants could not and would not have produced a copy of the relevant entry from the register for our perusal. When the Central Excise staff found certain stock to be physically present in the appellant's storage tanks on the date of inspection, it passes our comprehension how, as the appellants would have us believe, they could and would certify the stocks on physical verification to be nil. We note that no evidence to substantiate this plea was put before the Collector also, as noted by him in his order of 3-10-1986. We reject this contention.
8. Next, the learned consultant submitted that the Central Excise officers had completed assessments at 'nil' rate of duty. These had not been challenged nor reviewed. In fact, the Collector, in his Order of 3-10-1986, has stated that the documents maintained by the distillery as also the fact of assessment on the RT12 (monthly returns) were factors in favour of the appellants. But then, these, at best, could be considered as mitigating circumstances in the matter of imposition of penalty, especially in the context of the state excise officer's endorsements referred to earlier. But we note no penalty was imposed on the appellants.
9. For the respondent, it was submitted by the learned Sr. D.R. that the so-called practice could not over-ride the statutory requirements. The appellants had not produced any evidence that the Central Excise department had knowledge of, and concurred with, the so-called practice.
10. We have considered the submission of both sides. It is clear that molasses was not being physically removed concurrently with book transfers thereof from the ar> pellants to the distillery though the book transfers were apparently being accepted as removals of the goods for the purpose of state excise. Molasses does not fall in the list of goods on which states can levy excise duty. On the other hand, it is liable to Central Excise duty. Perhaps because of this, the state excise had no objection to the said arrangement. Be that as it may, would book transfer constitute actual physical removal for the purpose of Central Excise? We think 'not'. This is for this reason that though excise duty is, according to judicial pronouncements, a tax on manufacture of goods, the actual assessment and collection are postponed to the time of removal or clearance of the goods from the place of manufacture. Rules 9 and 49 may be referred to in this connection. Transfer of ownership of the goods is not relevant for this purpose. Central Excise duty will be liable to be paid even if the ownership of the excisable goods vests at no stage with the manufacturer. On manufacture, excisable goods attract duty. Only the actual assessment and collection get postponed to the time of removal or clearance from the place of manufacture. The liability to pay the duty, unless of exempted by an extent notification, devolves on the manufacturer. This liability cannot be avoided and does not get extinguished by the mere fact that the ownership of the goods is transferred to another person or a sister concern (as in the present case). The contention of the appellants in this behalf is legally untenable and has to be firmly rejected.
11. Molasses was excisable even prior to the 1980 budget under Item 68 CET. As the Collector has pointed out notification No. 119/75 exempted the goods only on condition they are captively consumed in the appellant's own factory or in another factory belonging to the appellant. The exemption will thus come into play only when the goods are sought to be removed for the specified purpose, not otherwise.
12. The contention that the assessments in RT.12 returns at 'nil' rate of duty had been completed by the Central Excise officials and therefore these could not have been re-opened is, in our opinion, not tenable in the circumstances of the present case. As noted earlier, no evidence has been produced before either the Collector or us to show that the Central Excise department had acquiesed in, or agreed to, the so-called "practice" of book transfers without physical removal. In fact, the consultant fairly stated that there is no record of this position having been specifically brought to the department's notice. That the state excise officers may have been satisfied with such an arrangement is not relevant for the purpose of compliance with Central Excise requirements.
13. In the aforesaid circumstances, we uphold the Board's order to the effect that in terms of Rule 9A(1) (ii), the rate of duty applicable in this case would be as applicable on the date of actual removal of the excisable and dutiable goods from the factory of manufacture.
14. In so far as confiscation and redemption fine are concerned, we do not find any extenuating circumstances. The appellants ought to have followed the prescribed procedures. As the Board has correctly observed, if the so-called "practice" was within the knowledge of, and not objected to, by the Central Excise department, there would have been no case for confiscation of goods. As we have seen, however, the appellants have not established the knowledge of the "practice" and acquiescence thereto, on the part of the Central Excise department. As such we do not see any reason to interfere with the orders of the lower authorities.
15. The result is both appeals fail and are rejected.