Custom, Excise & Service Tax Tribunal
M/S. S.A. Aanandan Spinning Mills (P) ... vs Cce, Madurai on 30 May, 2008
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
SOUTH ZONAL BENCH, CHENNAI
E/193/2006
(Arising out of Order-in-Appeal No. 251/2005 dated 28.12.2005 passed by the Commissioner of Central Excise (Appeals), Trichy).
For approval and signature
Honble P.KARTHIKEYAN, Member (Technical).
_______________________________________________
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M/s. S.A. Aanandan Spinning Mills (P) Ltd.: Appellant
Vs.
CCE, Madurai : Respondents
Appearance Shri M.N. Bharathi, Adv., for appellant Smt. R. Bhagya Devi, SDR, for respondents CORAM Shri P. KARTHIKEYAN, Member (Technical) Date of hearing : 30.05.2008 Date of decision : 30.05.2008 Final ORDER No.________/2008 This is an appeal filed by M/s. S.A. Anandan Spinning Mills (P) Ltd., (ASM) Rajapalayam, against an order of the Commissioner (A). In the impugned order the Commissioner (Appeals) upheld the orders of the original authority. Facts of the case in brief are that on 02.07.04, departmental officers made a surprise visit to the factory of ASM and on verification of stock of finished goods they found that there was shortage of finished goods to the extent of 13,264.158 kgs of cotton yarn and polyester yarn and excess of about 2800 kgs of such yarn of different counts and forms such as cone, DHCR, DHPR etc. After due process of law, the original authority demanded duty to the tune of Rs. 1,50,681/- on the goods found short and appropriate interest under Section 11A of the Central Excise Act, 1944 (the Act) and Section 11AB of the act respectively. A penalty of Rs.10,000/- was imposed on ASM under Section 11AC. The excess yarn was found liable for confiscation under Rule 25 of the Central Excise Rules (CER). In lieu of confiscation a redemption fine of Rs.41,509/- was imposed on ASM.
2. In the grounds of the appeal, ASM has submitted that the lower authorities had gone by the initial depositions of the factory manager which he had retracted within three days. The cross examination of the factory manager was denied which amounted to violation of principles of natural justice. Clandestine removal was a serious allegation which had to be established by corroborative evidence such as excess use of raw materials, electricity, proof of actual movement of goods without payment of duty etc. The lower authorities had not considered the explanation for the excess stock. Unlike duty, penalty was not automatic.
3. The Ld. Counsel submitted that clandestine clearance of the goods found short was not established by the department. There was no shortage of goods. The apparent shortage occurred as the officers did not determine the stock properly. Shortage of goods except a quantity of 978.938 kgs were available in the packing section which the officers had not taken into account while ascertaining the stock. 2799 kgs of finished goods were found to be excess as the staff concerned had not maintained the daily stock register upto date. This omission did not call for confiscation and penalty. No mens rea was found against the assessee or any personnel of the assessee firm. The stock was ascertained visually without physically weighing the goods. The Ld Counsel took me through the proceedings of cross examination of the Inspector and Superintendent who had conducted the stock taking. The Ld. Counsel relied on the following case law:
(1) CCE Calicut Vs. Steel Complex Ltd.
2006 (197) ELT 512 (Tri.- Bang.) In this decision the Tribunal held that excess found in the factory could be due to defective method of stock taking based on estimates. There was no evidence that the accounts were not maintained with an intention to evade duty. The excess may not have been accurate. As there was no attempt to clear the so called excess goods, their confiscation was not warranted.
2. Paithan Silk Mills Vs. CCE Mumbai 2006 (195) ELT 93 (Tri.-Mum.) The Tribunal held that the finished goods, ie., processed fabrics, were lying in different sections of the mill and the appellants were not sure of the RG-I stage. The shortage was a minor technical breach involving failure to maintain accounts upto date. The Tribunal set aside order of confiscation and penalty.
3. Lalit Chorda Vs. CCE 2002 (150) ELT 584 (Tri.-Del.) The Tribunal held that in the absence of evidence of clandestine removal, demand of duty for the shortage and penalty of Rs. 10,000/- on Shri.Lalit Chordia, Director of the appellant firm were not sustainable.
4. The Ld. SDR submits that the factory manager accompanied the officers who took stock of finished goods but had not shown to them any finished goods available in the factory omitted to be taken into account in the stock taking. He signed the mahazar narrating the shortage of some goods and excess in respect of certain other varieties. He had also admitted in a statement dated 2.7.04, the shortage of finished goods and the excess of other finished goods. The letter dated 5.7.04, explaining the shortage as due to erroneous method of stock taking was an after thought.
5. I have carefully studied the case records. There is no dispute that the factory manager Shri Balasubramaniam accompanied the officers when they visited various sections within the factory and ascertained the stock of finished goods. The excess quantity and the shortage were ascertained by counting number of bags containing yarn of 50 kgs. each and physically weighing bags which did not contain 50 kgs. I do not find that the stock taking followed an erroneous method. The factory manager agreed with the stock and shortage ascertained by the officers and endorsed the mahazar in token of his agreement. In a separate statement also, he had admitted the stock position ascertained by the officers. He cannot be heard to say that some quantities were left out in the stock taking and that the shortage ascertained was not real. It is obvious that the explanation for the shortage furnished by the factory manager on 5.7.04 was an afterthought. It is also not disputed that there was excess goods compared to the RG-I balance. The cross examination of the officers did not bring out anything different from the facts found by the lower authorities.
6. I have also considered the case law cited by the Ld. Counsel. The cases cited involved goods, the stock of which could not be ascertained without much labour such as steel billets, processed fabrics which lay scattered all over the factory and irregular marble slabs, the stock of which had to be ascertained by measuring irregular dimensions viz., area, height etc of the slabs. The case law cannot be followed in view of the fact that each case involved a unique set of facts and no proposition of universal application is available from these decisions. However, I find that the following observation of the Tribunal in Bhillai Conductors Pvt. Ltd. Vs. CCE [2000 (125) ELT 781 (Tri.)] is relevant:
Simple failure could not attract penal action under Rule 173Q. It is well settled that penal provision had to be construed strictly and in favour of the assessee unless the court is compelled by the language to construe it otherwise. Decisions refer to by the counsel on behalf of the appellants are of the consistent view in holding that no penal action can be taken under Rule 173 Q either in confiscating or imposing penalty unless the goods were removed illegally or final goods should have been in the preparation for such removal or they must have been seized while being transported without recovery or gate passes and without payment of duty. I find that a lenient view is warranted as regards the goods found to be in excess considering the assessees explanation. Accordingly, I reduce the fine from Rs.41,509/- to Rs.5,000/-. I also reduce the penalty from Rs. 10,000/- to Rs.5,000/- finding the same as sufficient. Appeal is otherwise dismissed.
(Order pronounced in open Court on 30.05.2008) (P.KARTHIKEYAN) MEMBER (T) BB 2