Customs, Excise and Gold Tribunal - Delhi
Ganga Rubber Industries vs Collector Of Central Excise on 8 June, 1987
Equivalent citations: 1988(19)ECR344(TRI.-DELHI), 1989(39)ELT650(TRI-DEL)
ORDER I.J. Rao, Member (T)
Central Excise Officers visited the Appellants' factory on 12.11.1975. As a result of the checks conducted they discovered certain alleged irregularities which were as follows:
(i) RG-1 Register was not filled from 7.11.1975 to 11.11.1975 due to the negligence of their clerk,
(ii) One Roll of rubber transmission belt valued at Rs. 902/- was not available in the store room,
(iii) The following beltings of value of Rs. 18,772.92 p. were found in the factory in excess of the balance in RG-1.
(a) 11 Rolls 1,214 metres belting
(b) 30 Pieces 195.5 "
(c) 34 Pieces 1,760 " " Semi-used belting.
(iv) Belting of the value of Rs. 28,834/- had been cleared from the factory without accounting in Excise records and without payment of duty, as evidenced from Bill Book Nos. 4 & 5 recovered from the factory premises.
(v) 325 pieces of V-Belts of the value of Rs. 23,984.50 p. had been manufactured by the factory withuot accounting them in excise records and without submission of classification and price-list.
(vi) As per the Sales Book (V-Belts) and V-Belts-Bill Book recovered from the factory, V-Belts of the value of Rs. 65,117/- appeared to have been manufactured by the factory and cleared without payment of duty.
2. The belting at (iii) above and the V-Belts at (v) above were seized by the Central Excise Officers for contravention of the C.E. Rules, 1944.
A show cause notice was issued on 12.3.1976 by the Deputy Collector of Central Excise threatening action under the Central Excise Law. After considering the reply to the show cause notice and after due process the Collector Central Excise, Kanpur adjudicated the case. He imposed penalty of Rs. 20,000/- on the Appellants and confiscated the 75 pieces of belting and 325 of V-Belts without payment of C.E. duty.
3. The Appellants filed an appeal before the Central Board of Excise and Customs. The Board by the impugned order confirmed Collector's orders but reduced the penalty from Rs. 20,000/- to Rs. 5,000/-. Thereafter, the Appellants filed a Revision Application before the Central Government. This Application on statutory transfer to the Tribunal is now an Appeal before us.
4. We heard Shri H.P. Arora Advocate for the Appellants and Shri S. Krish-namurthy, Learned SDR for the Respondents. The Learned Advocate submitted that the Belts in question were unfinished and referred to a statement given by Shri Narender, be partner of the Appellants' firm. He emphasised that as the goods were not fully manufactured they need not be entered in R.G.I, account. With reference to recovery of documents, he stated that the Department relied on these documents for its allegation that ove. Rs. 65,000/- worth of goods were illicitly removed from the factory. All these documents were not reliable for the reasons mentioned by the appellants before the Collector and later before the Board. He submitted that the Appellants filed affidavits before the Collector in connection with the alleged documents but the Collector did not rebut these affidavits nor did he accept them.
5. The Learned Advocate further submitted that the seizure was made without reasonable belief and therefore offended the provisions of Section 110 of the Customs Act which were made applicable to Central Excise Law. He further submitted that even in the show cause notice it was not stated that the seizure took place under reasonable belief.
6. The Learned Advocate referred to an enquiry report, copy of which was supplied by the Collector to the Appellants. He submitted that the Collector partly accepted the enquiry report and partly rejected it without giving reasons for such an action. Citing the judgment of the CEGAT Dwarka Prasad Lulla v. Collector of Customs (Appeals) [1986 (24) ELT 620] the Learned Advocate argued that the Collector should have accepted the enquiry report in full or rejected it-in full giving reasons for his action. This was not done. Further he argued that according to the 'Recovery Memo.' account books on which the Department relied were recovered from the roof of the premises. Shri Arora submitted that the premises were a very old building and it is improbable that the bill books would have been found on the roof. For these reasons the Learned Advocate submitted that confiscation of the goods, demand for duty and the imposition of penalty could not be sustained.
7. Shri Krishnamurthy, the Learned SDR opposed the arguments and submitted that while it is a fact that reasonable belief was not recorded in the recovery memo. or in the notice to show cause, this would not render the seizure and subsequent action invalid. Besides, the Appellants never raised this ground before the lower authorities and they could not raise this ground for the first time before the Tribunal.
8. The Learned SDR pointed that the allegations made about 325 pieces of V-Belts was correct. Referring to the Collector's order he stated that recovery memo, showed that all the 325 V-Belts were found packed separately in packages with the size of each V-Belt marked on each package. Therefore, the subsequent assertions by the appellants that these V-Belts were in loose heaps and that they were placed in packages by the Central Excise staff were incorrect. The Learned SDR argued that the V-Belts were in huge quantity and such huge quantity could not be merely a trial production. Further the V-Belts, even if they were not upto the standard, were liable to duty, as for Central Excise purposes they were assessable goods.
9. Shri Krishnamurthy referring to the arguments of the Advocate about the unreliability of the records recovered by the Central Excise Department, submitted that the Appellants could not prove either before the Collector or the Board or even before us that the records were planted, as claimed by them, by an Ex-Employee of the Factory who was dismissed earlier.
10. The Learned SDR argued that in these circumstances and for the reasons mentioned by the Collector and the Board the confiscation of the goods, demand for duty and the imposition of penalty were legally sustainable.
11. We have considered the arguments of both sides. During the hearing it was argued vehemently by the learned Counsel of the appellants that the seizure and subsequent actions were illegal inasmuch as the Central Excise Officers did not record in the search list or even in show cause notice that the seizure was made under the reasonable belief that the goods were liable to be confiscated. They submitted that the non-existence of reasonable belief at the time of search would vitiate the entire proceedings in respect of incriminating accounts, goods seized and shortages detected. In support of their arguments the Appellants cited the following three judgments:
(1) Jenson Enterprises v. Collector, Customs, Cochin [1987 (28) ELT 346 Madras. (2) Innovation, Secunderabad v. C.B.E. and C. [1984 (15) ELT 91 (A.P.)]. (3) Bishnu Kumar Shrestha v. U.O.I. [1987 (27) ELT 369 (Cal.)].
12. We have examined these judgments. In Jenson Enterprises v. Collector, Customs, Cochin [1987 (28) ELT 346 Madras], the court held that the seizure and confiscation were quashable when seizure was made without entertaining a reasonable belief. The High Court of Madras was, in that case, considering a situation in which goods for which "let export order" was passed were seized. In the circumstances of that case there could not have been reasonable belief. In the present matter Central Excise Officers visited the Appellant's factory, checked the accounts, verified the stock physically and then made the seizure. Therefore, it cannot be said that the Central Excise Officers could not have had a reasonable belief when the accounts did not agree with the balance of stock in the factory.
In Innovation, Secunderabad (Supra) the Andhra Pradesh High Court held that any invalidity of search does not vitiate the seizure and further investigations. While observing so the High Court recalled a judgment of the Supreme Court in State of Maharashtra v. Natwarlal Damodardas Soni, 1980 (4) S.C. case 669. This judgment is clearly against the arguments of the Appellants.
In Bishnu Kumar v. U.O.I. the court was dealing with a situation in which the search was conducted under Foreign Exchange Regulation Act. We would like to observe that under the Central Excise Law, there are provisions under which the Central Excise Officers may visit the licence premises and conduct checks. It does not appear that similar situation prevailed in respect of FERA. Besides, we have held that in this case, the Central Excise Officers can be assumed to have had reasonable belief in his case. In these circumstances, we do not accept the arguments of the Appellants that the seizure and subsequent actions were invalid.
13. We now examine the claims and counter-claims in respect of each item.
14. 30 pieces of rubber belting were held not to have been accounted for in RG-1 Register. The Board upheld this finding. The appellants' plea is that these were not proper transmission beltings and were not of the required quality. The Learned Counsel relied upon the statement of Shri Narender Pal partner of the firm. We have examined the statement wherein Shri Narender Pal deposing that the machinery in the factory was incomplete and it was a trial stage and that the pieces manufactured were not upto the standard required. Therefore, we cannot accept the arguments of the Learned Counsel that the pieces were "not fully manufactured". Factually, this argument is at variance of the statement recorded. In this view we uphold the findings of the Board in this regard.
15. In respect of the rubber belting (176 Metres) the claim of the Appellants is that this belting was received back from customers and was mixed with non-duty paid beltings. This is the plea of the Appellants as recorded in the Board's Order. In the Appeal, the Appellant pleads that their machinery was running on a cable system without any pulley to use the rubber transmission beltings. In view of the change of plea regarding the factual position as put forward by the Appellants earlier and now, we do not find justification to interfere with the orders regarding the confiscation of these goods. The reduced fine in lieu of confiscation of these items is upheld.
16. In respect of 35 Metres V-Belts, the Appellants' plea was that these belts were not packed in gunny bags etc. They plead that these were lying loose and in a heap and these were tied in bundles by the Central Excise Officers. We have examined the recovery memo. It does not appear that what the Appellant states was the correct factual position. However, this does not help them because even if the goods were not bundled, their existence without entry in RG-1 Register is established. Therefore, we up hold the confiscation of the same as also fine of Rs. 1,200/- imposed by the Board in view of the confiscation.
17. In respect of the two account books stated to be seized from the premises of the appellants, the claim made is that these books were planted by one of the disgruntled employees. The Board rejected the denial of the accounts books by observing that Shri Narender Pal tendered his statement on 12.11.1975, but refrained from saying anything in respect of these two books. In the opinion of the Board if these books were not of the Appellants nothing prevented him from saying so in his statement. Further, the Board noted that the recovery was made on 12.11.1975 and the Appellants neither mentioned anything about them in the recovery memo, nor did they write to the Department prior to a lapse of 4 months after the seizure.
18. The Appellants' plea is that even the place of the recovery of the books is improbable. According to the record the books were recovered from roof of the factory. This was according to the appellants accessible to any one. They further pleaded that the Appellants were not allowed to scrutinise the books at the time of seizure and were asked to sign the recovery memo.
19. We have considered his arguments. The Department could have and should have made enquiries to find out if the entries in the two books were genuine or not. Transport Companies, Octroi Posts, and Consignees to whom the goods were allegedly sent were the resources from which verification of the accounts was possible. No verification was done. Besides, the principle of law is that it is upto the Revenue to prove reliability of the books. The Appellants cannot be asked to establish his pleas especially when there is no evidence that any of the consignments were actually sent from the factory. It does not appear that any attempt has been made to compare the hand-writing in the books with that of any one in the factory. We, therefore, held that the Revenue has not proved that the entries in the accounts in these books represented actual clandestine removals. Besides, it appears odd that the books were kept on the roof of the factory. Taking all the circumstances into consideration, we extend the benefit of doubt and set-aside the Board's order to the extent that duty was demanded on the basis of these registers.
20. It is established that the Appellants did not make entries in their RG-1 Register for a number of days. We do not accept the explanation given by the appellants. Maintenance of proper accounts, especially of production, is a very important statutory duty of the appellants. They failed in this regard and rendered themselves liable to penalty.
21. In the circumstances, we order that the penalty may be reduced from Rs. 5,000/- to Rs. 2,000/- only. We modify the impugned order as indicated above. The Appeal is partly allowed.