Customs, Excise and Gold Tribunal - Delhi
Maya Mahal Industries vs Collector Of Central Excise on 15 March, 1995
Equivalent citations: 1995(80)ELT118(TRI-DEL)
ORDER Gowri Shankar, Member (T)
1. The facts leading to this appeal briefly are as follows :-
The appellant firm was licensed to manufacture blank video cassettes. During verification of stock of the cassettes in the appellants' factory premises, the Central Excise Officers found a certain number of video cassettes with names of various Hindi films. Some of the cassettes had labels with the name 'Super'. The officers also found that there was a room in the factory equipped with video cassettes recording. The officers recorded the statement of Shri Suresh Chand, an employee. He stated that the factory contained 48 video cassette recorders on which video cassettes were being recorded, and the pre-recorded cassettes were despatched outside the factory. A statement to the same effect was also given by another employee, Km. Aneeta Goyal. The officers seized 204 pre-recorded cassettes - 132 cassettes on which recording had been erased and 59 blank cassettes. In the course of investigation, the officers searched the premises at 89, Palika Bazar, New Delhi and recovered 58 pre-recorded cassettes 'super' brand. They also recorded the statement of Shri Balinder Singh Sachhar. He stated that the owner of the shop was Shri K.K. Sharma, the proprietor of the appellant firm and that pre-recorded cassettes were being received in the shop from April 1987 onwards. Show cause notices were issued in due course to the appellant firm - Super Video Enterprises, 89, Palika Bazar, New Delhi, Shri Sharma and Shri Balinder Singh Sachhar, proposing recovery of Central Excise duty, on 14783 pre-recorded cassettes alleged to have been produced and cleared without payment of duty, confiscation of the seized video cassettes and imposition of penalty upon each of the noticees. After adjudication proceedings, the Additional Collector of Central Excise, Noida ordered confiscation of the seized cassettes with an option to redeem them on payment of fine. She confirmed the demand for duty and imposed a penalty of Rs. 20,000/- on Shri K.K. Sharma. This appeal is against that Order.
2. Shri Kamaljeet Singh, Advocate for the appellant argued that the appellant had by its letter dated 14-1-1987, made an application for duplicating pre-recorded cassettes and asked for proper amendment of the Central Excise Licence issued to it. No reply was received to this letter; the licence was not amended. Therefore, after expiry of 60 days, as provided in the rules, the appellant commenced recording video cassettes. Rule 174 of the Central Excise Rules provides that, if no reply is received within 60 days of the application for licence, it is deemed to have been granted. However, he emphasised that recording was done only to test the 48 video cassette recorders which the appellant had purchased. The appellant was also apprehensive of action for breach of trust and violation of contract by film-makers with whom it had entered into contracts for recording cassettes. He emphasised that no prerecorded cassette had been cleared by the firm. The 204 pre-recorded cassettes lying in the factory were not ready for sale and finishing work was to be done on them. Fifty-nine cassettes had not been entered in the RG 1 register because they were the previous day's production. The 132 erased cassettes have been received as replacement from parties, but have been erased to make them marketable as un-recorded cassettes. The appellant did not have U-Matic cassettes, which are essential for use as masters for recording. The request for cross-examination of Shri Balinder Singh Sachhar had been turned down by the Additional Collector and, therefore, her order was illegal as the appellant was not given an opportunity to rebut his statement. The slips of production which had been relied upon do not relate to the period for which a show cause notice was issued.
3. The Departmental Representative adopts the reasoning of the Additional Collector.
4. The appellant, it is true, had asked for cross-examination of Shri Balinder Singh Sachhar. The Additional Collector has recorded in her Order at page-9 that the appellant had been informed that since Shri Sachhar was himself a noticee, it would not be proper to summon him to give evidence. The reason for this although not stated in the Additional Collector's Order is evident, that it would not be proper to put Shri Sachhar in a position where he might have to incriminate himself by giving evidence. This is clear when the Additional Collector goes on to say that Shri K.K. Sharma was informed that if he wished Shri Balinder Singh Sachhar to make a statement, he could bring him along in the hearing. It is clear from the Additional Collector's order that at the next hearing Shri Balinder Singh Sachhar did not appear. Since Shri Sachhar was a co-noticee, the Additional Collector's action in not summoning him is correct in law; she has further made it clear that should Shri Balinder Singh Sachhar wish to be cross-examined by the appellant, he was at liberty to appear for that purpose. The appellant does not dispute any of these facts. In these circumstances, it cannot be said that the appellant was not given an opportunity to question Shri Balinder Singh Sachhar recording his statement. There has, therefore, been no failure of natural justice on this account.
5. We also do not agree whether the fact that U-Matic cassettes were not found establishes conclusively that the appellant could not have manufactured pre-recorded cassettes. We agree that U-Matic recorders and cassettes are used in order to obtain recordings of high quality. It is, however, not correct to say that recorded cassettes cannot be duplicated without such equipment. It is a matter of common knowledge that a video-cassette can be duplicated by transferring the image and sound on it to a blank cassette by employing with video cassette recorders, one for playing back and the other for recording. The fact that the appellant agrees that it had purchased 48 cassette recorders shows that it was engaged in duplicating pre-recorded cassettes. The presence of such a large number of VCRs cannot otherwise be explained. Indeed, the appellant has not even tried to explain it. That the appellant had intended to make pre-recorded cassettes is clear from its application for amendment of the licence to this effect. It is admitted by the appellant that it embarked upon recording cassettes and that 38 cassettes were recorded. The statements of the two employees at the factory confirm that video cassettes had been manufactured and is not out of the factory. The fact that cassettes bearing the label 'Super' were found both in the factory and in the shop at Palika Bazar and the statement of Shri Balinder Singh Sachhar also confirmed the fact of clearance of the cassettes from the appellant firm. We note that it is not alleged that any of the statements were retracted. While it is claimed that manufacture of video cassettes commenced in 1987 and number of cassettes alleged to have been manufactured could not have been manufactured during the period in question, the appellant is not able to furnish any evidence to this effect, or to assail successfully the allegations in the show cause notice from the Additional Collector's finding. The presence of a large number of video cassette recorders of the substantial quantity pre-recorded cassettes found in the factory in the shop lend credence to the Additional Collector's finding. The Assistant Collector's finding that the claim that 59 blank video cassettes were not entered in the RG 1 register because they were the previous day's production is an after-thought since it was not made immediately after seizure has also not been successfully challenged. The appellant has itself agreed that 132 erased cassettes had been recorded earlier.
6. In the event we conclude that the demand for duty has been correctly confirmed as also order of confiscation and imposition of penalty. The redemption fine and the penalty are not seemed to be disproportionate to the gravity of the offence. In the circumstances, we confirm the order of the Additional Collector and reject the appeal.