Customs, Excise and Gold Tribunal - Tamil Nadu
S. Avudayammal (Vasuki Match Works) vs Collector Of C. Ex. on 3 February, 1990
Equivalent citations: 1990(30)ECR16(TRI.-CHENNAI), 1990(49)ELT415(TRI-CHENNAI)
ORDER V.P. Gulati, Member (T)
1. This is an appeal against the order of Collector of Central Excise, Madurai. Brief facts of the case are that the authorities visited the premises of match units namely M/s. Vasuki Match Works and M/s. Surendran Match Works, which were licensed in the name of Smt. S. Avudayammal, the appellant, and Smt. P. Mariammal, her daughter-in-law. The authorities on the day of the check found that in the first factory there was no stock of matches and there was no stock balance in the RG.1; the manufacture of matches was going on and the cardboard outer shells used for match splints contained the name of M/s. Surendran Match Works on their skillets. They also found that oven, hot plate and racks were available and the dipping plate was also there in the verandah. They also found 150 frames in the factory. The splints, however, were found to have been filled into the cardboard outershells bearing the address of M/s. Surendran Match Works and these were found to be 48 gross and these were seized. In the other factory of Surendran Match Works they did not find any manufacturing activity going on. However, in the 3 rooms of the factory they found various raw materials like glue, Veneer innershells and 12 gross of veneer matches were also available. They also found 12 frames filled with veneer splints. While no work was going on in the oven, they found necessary equipment for the manufacture such as racks, dipping plate, levelling plate, frames for side painting were not available. They also found that on 31-1-1986 100 gross was shown as manufactured in the cardboard RG-1 account and the balance for February, 1986 were also shown as 100 gross but the same were struck off and shown as 'NIL' showing that the appellant had entered the production of 100 gross but later on struck it off. 12 gross of veneer matches found in excess were seized. The appellant explained that the matches manufactured by her were of 'Fly Bird' brand and by mistake the illiterate workers had used the outer skillets of M/s. Surendran Match Works. Taking into consideration the facts above, a show cause notice was issued to the appellant alleging that basic and main process of production of matches in respect of the two units was done only at M/s. Vasuki Match Works belonging to appellant and that the quantity of matches shown in the Central Excise records of M/s. Surendran Match Works was really produced in Vasuki Match Works only and taking into consideration this factor it was alleged that M/s. Vasuki Match Works had exceeded the ceiling limit of 15 million sticks prescribed in Notification 22/82 during July, 1985 and that M/s. Vasuki Match Works was not entitled to the benefit of concessional rate of duty at Rs. 1.60 per gross. The appellant was informed that clearances of 10375 gross of matches effected from appellant's unit from 1-4-1985 to 31-3-1986 were not entitled to concessional rate of duty at Rs. 1.60 per gross and they were called upon to pay the differential duty holding the goods assessable at the rate of Rs. 4.50/3.50 per gross during the year 1985-86. The duty was also demanded in respect of splints alleged to have been removed from M/s. Vasuki Match Works to M/s. Surendran Match Works during the year 1985-86 and also in respect of the cardboard matches and longer period of limitation under Section 11A of the Act was invoked. The 60 gross of matches found in excess in the two units were also indicated to be liable for confiscation. The appellant in the reply to the show cause notice pleaded that the same brand had been approved for the manufacture of both the units; that the mix up of packing material as alleged was only due to mistake and it was pleaded that there was no warrant for clubbing the clearances of the two units. The learned lower authority has gone by the fact of the filling up of the cardboard outershells for match splints containing the name of M/s. Surendran Match Works on their skillets and has observed that the parties in their replies to the show cause notices and their counsels in the written submissions after personal hearing without attempting to prove that the matches were actually produced in the respective units contended that the Department was fully aware of the activities of the two units because of physical control by the Department. The Collector has also discounted the appellant's contention made before him that both the factories were capable of producing matches and has held based on the check of the two factories on the day when the officers visited and detected the case, that M/s. Surendran Match Works were not capable of manufacturing the matches and has stated that it was up to the appellants to cross-examine the witnesses to prove their contention. A plea was also taken before the lower authority that no statement was recorded from the employees of the factory. The learned Collector has observed that since the licensees of the factories were available at the time of the visit of the officers there was no necessity to obtain any statement from the employees and that the mahazar drawn by the officers was nothing but what the officers have observed at the time of their visit and that the contention of the parties that the officers have on their own presumption and assumption levelled charges against them in the show cause notice was also not correct. The learned Collector also took note of the fact that no record of the raw material was found maintained in spite of the fact that the Collector had issued Trade Notice calling upon the match units to maintain raw materials account for veneer splints, sulphur, outers, inners, etc. and has observed that if both the licensees are running their respective factory separately and separate accounts ought to have been maintained for the sake of effective control if not for satisfying Central Excise requirements and that this is a clear indication that the operations carried out in the two units were collective. The appellant also took the plea that the dipped splints in the intermediate stage were not chargeable to duty and the Collector has held that even the dipped splints are match sticks and also an excisable product.
2. The learned Advocate for the appellant pleaded that no doubt on the day of the visit of the officers the outershells of M/s. Surendran Match Works were found in the appellant's unit but this by itself does not mean that the matches were being manufactured in the appellant's unit to hold out the same as being the manufacture of Surendran Match Works. He pleaded that both the appellant and the proprietary of the other unit are mother-in-law and daughter-in-law and some mix up of the raw material could have taken place on account of the mix up on the part of some of the workers who are mostly illiterate. He pointed out that merely because officers on a particular day found a few boxes of the other unit being used cannot by itself be a reason enough to hold that all the production during the year shown in the name of M/s. Surendran Match Works in fact was that of the appellant's unit. He pleaded that no investigation was d6ne to ascertain the fact from the workers regarding the use of the raw materials and manufacture of the goods. He pleaded that both the units had the same label registered for the manufacture of the matches and some mix up because of that would have occurred.
3. The learned D.R., on being pointed out about the absence of any investigation to ascertain the facts as to the operations in the two units, stated that no doubt the authorities could have done better job of investigation but the fact remains that some of the boxes of the other unit were found in the appellant's unit and the authorities have rightly drawn the inference as held by the Collector.
4. We observe that the authorities in the present case on a surprise check had a genuine reason for suspicion on finding that the boxes of other unit were being used for filling the matches in the appellant's unit. The question that falls for our consideration is whether this factor is alone enough to fasten the liability of duty on the appellants at a higher rate holding that all the matches manufactured in Surendran Match Works were in fact manufactured in the appellant's unit in the past. We observe that mere suspicion cannot take the place of proof and probabilisation of evasion has to be done by bringing on record either documentary evidence or evidence of the persons who may be concerned with the operations of the manufacture of matches or other corroborative evidence. In the present case we observe that the Central Excise authorities have tried to build up the case on assumptions and presumptions and have been remiss in not carrying out any further investigation after the detection of the use of the outer covers of the other unit in the appellant's factory. The Collector has brushed aside the appellant's plea that no statements from the workers were recorded merely by stating that since the appellant was present there was no need for recording of such statements. The mahazar, it is seen, only reflects the position as existed on the day when the seizure took place but no further conclusion can be drawn from this unless any further evidence can be adduced in regard to the operations carried out during the period preceding the day of the visit of the officers. The Collector has cast the burden on the appellant to prove that the matches were in fact produced in the two units. He has not stated what sort of proof was required in this regard. The proof in such cases has to be found by investigation and by recording the statements from the workers and also from finding out as to who had been controlling the two units and who had been handling the procurement of raw materials, issue thereon, and also the sale of the matches. It is pointed out that the match units are under physical control of the Department and, no doubt, as mentioned by the Collector, the officers are not physically posted in each unit but the fact remains that the release of the goods are allowed with the knowledge of the authorities and by virtue of the physical control there is a sufficient degree of supervision by the officers who would have been visiting the units regularly. If no manufacture of matches was taking place in M/s. Surendran Match Works, this fact could have come to light during the course of some of the visits of these officers. Since no instance of this nature has been cited, the appellant's version will have to be believed that they were carrying on the manufacture of matches on their own account only. The Collector has observed that complete manufacture of matches could not be carried out at Surendran Match Works but he has brought no evidence on record to show that the appellant during the relevant period did not have all the necessary equipment for the manufacture of matches more so when the officers had visited the units often as required under the physical control system. There is nothing on record to show that the other licensee i.e. Surendran Match Works was not capable of manufacturing the matches as alleged. It is further observed that at the time of licensing of the units the authorities are required to satisfy that the applicant is capable of manufacturing products for which they have sought the licence and also had the necessary verification has to be done about the machinery etc. installed. In the above background, therefore, it cannot be held that all the matches as alleged were manufactured at the appellant's unit. This is again one of type of cases which we have come across earlier where the authorities have been content in making seizure on a particular day and have not followed up with further investigation to establish the evasion. We find no reason why no statements were recorded from the employees and no further efforts were taken to ascertain the facts regarding the operations of the two units and to establish that the unit of M/s. Surendran Match Works was only a front dummy unit set up to evade payment of duty. In this view of the matter we hold that there is no warrant for demand of differential duty as alleged and also duty on the sticks as demanded. So far as the confiscation of 60 gross of matches under seizure under Rule 210 of the Central Excise Rules is concerned, the same is upheld and so also the levy of the redemption fine in regard to the same. In the facts and circumstances of the case the penalty on the appellant under Rule 210 is reduced to Rs. 50/- (Rupees Fifty only). The appeal is, therefore, partially allowed in the above terms.