Customs, Excise and Gold Tribunal - Mumbai
Jayant Extraction Indus. Ltd. vs Additional Commissioner Of Central ... on 18 May, 2004
Equivalent citations: 2004(171)ELT501(TRI-MUMBAI)
ORDER K.D. Mankar, Member (T)
1. The instant appeal of the appellant is directed against the order of the Additional Collector, Central Excise, Rajkot, whereunder, an amount of Rs. 2,18,260.50 was confirmed against the appellants as duty, by invoking larger period of limitation. Besides penalty of Rs. 50,000/- has also been imposed.
2. Briefly stated, on 1.1.86, the Central Excise officers carried out a stock verification in the factory of the appellants, who are engaged in the manufacture of Vanaspati (V.P.). During the process of stock verification, it was revealed that, the appellants had stored 2076 empty tins of 15 kg capacity in the Bonded Store Room (BSR), Hence it was alleged that the appellants had removed 2076 x 15 = 31,140 MT, of V.P. (the contents of the empty tin) in a clandestine manner involving duty of Rs. 47,745/92, and in the place of tins filled with V.P., the said empty tins were substituted.
2.1 Besides the above evasion, the officers further noticed that daily stock account was written up to 29/30/12/85 and after considering the production of these two days, it was revealed that there was a shortage of 3532 x 15 kg = 52.980 MTs of V.P., leading to demand of duty of Rs. 81,232/46.
2.2 Further it was noticed that, 61.295 MT of oil, though shown in private records as received, the same was not entered in the raw material account (Form IV Register) and issued to the plant on 30.12.85 and 31.12.85. The said oil could have produced 58.230 MT of V.P. assuring a conversion ratio of 95% yield per 100 Units of raw veg. oil. The Said quantity of 58.230 MTs was allegedly not accounted for in the RG1 register and removed clandestinely involving a duty of Rs. 89,282/12. The total demand thus works out to Rs. 2,18,260/50.
3. Though the shortages were noticed on 1.1.86, the show cause notice was issued beyond the period of 6 months on 9.1.87. Hence the appellants have contested the duty demand on limitation. The appellants further claimed that production figures were prepared by the sales assistant and ... prepared for the purpose of making payment to labour. The figures shown were a mistake. There was a labour unrest on that day and shifting of empty containers in the BSR is claimed to be on account of some mischief.
4. The adjudicating authority, however, did not consider these ground and confirmed the aforesaid demand and imposed penalty, which is under challenge in the instant appeal.
5. Heard both sides.
6. I note that, so far as the first part of the demand on account of existence of empty containers, in the BSR is concerned, the same is without any logic. In case the appellants had really manufactured 2076. Tins of V.P and removed them in a surreptious manner, then there was no reason for them to stock equivalent number of empty tins in the BSR. It is not the case of the department that the production figures showed the quantity inclusive of 2076 tins and there was a shortage of 2076 tins. It is not explained in the order or the show cause notice as to why a manufacturer will try to cover the act of surreptious removal carried out successfully (if the version of surreptitious removal is to be believed) by lodging equivalent number of empty tins in the BSR. Therefore I hold that, this part of the demand can not be sustained, in the absence of independent and corroborative evidence of surreptious removal.
7. The next allegation relates to clandestine removal of 52.980 MTS of V.P; based on the difference between the physical stock and the book balance. This excludes the quantity of 2076 empty tins discussed in the previous para. It is alleged that the there Was a shortage of 3532 tins of 15 kgs. The appellants have tried to offer some explanation that the stock figures were prepared through a mistake, stating that basically the same were prepared for making payment to labour, and through mistake the same got incorporated in the RG1.
8. So far as this defence is concerned, the same is very weak. The manufacturer must be deemed to be aware of the implication of making an entry in the production register maintained for excise purpose (RG1 record), being an established duty paying unit. There is no compulsion on him to make an entry of production, which has not occurred. Once the production is recorded in the RG1, the burden is on the manufacturer to explain as to what happened to that production and in what manner the manufactured goods have been disposed off. However, having said this, a mistake in record keeping can not altogether be ruled out at all times and when the appellants are stating that there was a mistake in preparing the production record and there was a production stoppage on 1.1.86 due to labour unrest, the said version needs to be extended some credibility and the possibility of the evasion as reflected through the stock shortage needs to be corroborated independently. In other words, while the shortage of physical stock with reference to that reflected in the RG1 must, as a general rule lead to a conclusion of evasion, in the cases where a mistake in recording the stock is alleged (and such mistakes can not altogether be ruled out), a second look at the charge of evasion is necessary in the interest of justice. In this case for the reasons I am recording in the succeeding paragraphs, such a second look is necessary.
9. It is noted that production of V.P. was under the control of the state government authorities in terms of vegetable oils production control order. For the purposes of the requirement of the said act, as well as under the Central Excise Rules 1944, the appellants had maintained certain records like Tin Container Register and Raw Material Account of vegetable oils (Form IV Register).
10. It is pertinent to note that, no discrepancy in the Tin Container Register is alleged, which goes on to show that consumption of the containers and stock match with the RG1 record. There is no whisper or an allegation that the appellants had received the required number of empty tins, for clandestine manufacture, over and above the quantity reflected in Tin Record.
11. It is mentioned in the paragraph 4 of the order of the adjudicating authority that, on the date of visit i.e. 1.1.86, the form IV register was written upto 29.12.85 and no receipts or issue for 30.12.85 and 31.12.85 were posted in the register. On verification of oil storage tank the balance shown in the FORM IV record tallied with the physical stock. However, on reference to weigh bridge record of oil received on 30.12.85 and 31.12.85, it is stated that, though the quantity of 61.295 MTA is stated to have been received on these dates, the same is not reflected in the Form IV register. Therefore using the formula of 95% yield, it is alleged that 58.230 MT of V.P. has been removed in a clandestine manner. On this point the appellants are pleading that though the said oil is shown to have been received in the factory on the dates shown in the W/B register, the same had been shown as issued for production on the subsequent dates. In respect of receipt of oils at Sr. No. 1 to 4 of the Table below, the said quantities have been shown to have been issued for production on the same day. Therefore, on applying the logic of similar disposal it is alleged that the balance quantity is hot accounted for.
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S.No. Variety of Oil Date of Quantity
Receipt (MT)
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1. Expeller Rape Seed Oil 11.12.85 9.850
2. Imported Soya 20.12.85 23.430
3. Tin Oil 24.12.85 13.930
4. Washed Cotton Seed Oil 30.12.85 9.770
5. Imported Soyabeen Oil 30.12.85 24.365
6. Til Oil 30.12.85 13.310
7. Imported Soyabeen Oil 31.12.85 23.620
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118.275
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12. The allegation of clandestine removal of derived quantity of 58.230 MTs of V.P., made out of 61.295 MTs of vegetable oil unaccounted in the Form-IV register lacks credibility, because the process of converting the vegetable oil into a vanaspati takes at least one day and after achieving the hydrogenation, the vanaspati has to be kept in cold storage for 24 hours. So if the appellants had realty indulged in the process of clandestine manufacture and removal of the said quantity, at least on 1.1.86, i.e. the date of visit same quantity of V.P., manufactured out of the unrecorded quantity of 23.620 MTs of said oil received on 31.1.85, should have been visible in the BSR/cold storage. In the absence of any such discovery, the theory of clandestine manufacture and removal must fail.
13. Once having reached the above conclusion relating to clandestine removal consequent to detection of raw material shortage, the left over allegation namely shortage of stock (52.980 MTs) in the BSR also has to be examined with a certain degree of circumspection. When the department has built up the case on the basis of entries in the private record like, weigh bridge register, then for evacuating the said quantity of 52.980 MTs plus the quantity of 58.230 MTs relating to shortage in stock in raw material (raw oil) at least the entry of 50 odd Trucks would be necessary in the private record (W/B register). After all if the maimfacturer's Weigh Bridge record is being used by the Departmental to press the charge of evasion, non-existence of entries in the private record relating to entry of Trucks to evacuate the products must also be believed. No clarification has been sought from the appellants as to whether they have a system of recording the entry of trucks in the plant. It is not forthcoming from the order of the show cause notice as to what procedure has been followed for entry of Trucks while making licit despatches on 30.12.85, 31.12.85 and 1.1.86. It has come on records that the sector office in located in the factory. If the evasion of this scale was going on it is difficult to believe that the sector office could not have spotted the to and fro entry of several trucks carrying empty tin containers to be used for clandestine removal. There is no allegation that the officer had colluded with the appellants.
14. Therefore in the absence Of any corroborative evidence showing clandestine removal, I hold that, the allegations are based only on suspicion and can not be sustained. The manner of stocking empty tin containers along with containers filled with V.P. does raise a suspicion about some malafide intention of the appellants. But it is an established law that, suspicion, howsoever grave, can not be a substitute for an evidence.
15. In the light of the above discussions I hold that the impugned order can not be sustained and the same is accordingly set aside and the appeal of the appellants is allowed, with consequential relief, if any, in accordance with the law.
(Pronounced on ...18/5/04........)