Customs, Excise and Gold Tribunal - Mumbai
Shangrila Latex Industries Pvt. Ltd. ... vs Cce on 21 October, 2005
Equivalent citations: 2006(194)ELT106(TRI-MUMBAI)
ORDER Archana Wadhwa, Member (J)
1. The appellants M/s Shangrila Latex Industries Pvt. Ltd., is a 100% EOU, are engaged in the manufacture of hand gloves and women condom of Latex rubber, falling under chapter 40 of the Central Excise Tariff Act. Their factory was visited by the officers on 21/03/1992, and stock verifications were conducted. The records were found to be tallying with the physical stock of the goods. The officers also seized various private records maintained by the appellants, during the course of manufacture and it was believed that the production as shown in such private record was more than the recorded production in RG-1.
2. As a result of post seizure investigation statement of Shri Sanjay C.Munshi, Managing Director, of the company was recorded. Shri Munshin in his statement dated 21/03/92, explained that the discrepancy between the private production records and statutory records was due to fact that the production of any day accounted by the production department as finished goods did not constitute finished goods as far as their export department was concerned, for the reason that the product is first air tested at which stage there are rejections and wastages; that the air tested products is then sent to the quality control department and only after approval of quality control department, the goods are packed; that the packing is done manually and the goods are simultaneously subjected to visual inspection and accounting and then packed in dispenser boxes and then finished products produced on a particular date as finished product for exports are accounted after a considerable length of time.
3. Statements of Production-in-charge, Shri Bobby Sebastian, was also recorded on 01/09/92 wherein he deposed that they had not started the production of women condoms but have conducted trial experiments, that they started commercial production of hand gloves by second week of January 1992 only; that they use P.V.Latex for manufacture of female condoms and rubber hand gloves and not other chemical is required to be added in the latex as it is already compounded and ready for use. He also clarified that he had maintained one shift log in his department wherein details about the production were recorded; that at the end of the shift log they weight the entire products and record in shift log; that they arrive at approximate pieces produced by dividing average weight of a product. During the production stripping waste arises which is recorded in the shift log. The inspection department is inspecting the product and Shri Thomas was in charge of inspection department.
4. Statement of Shri Samkutty John was also recorded on 03/04/92 and of Shri Avtar Singh Rana on 07/04/92. He clarified that the female condoms were not accounted for as the same were manufactured on account of research and development activity. Further statements of Shri Munshi and other persons were also recorded during the course of investigation and it was mainly contended by the deponents that the production in the private record is being taken continuously for all the three shifts whereas inspection is not done in three shifts and hence there is considerable back log in the inspection department and the final figures which are available after completion of the inspection and quality control checks are entered in their statutory records.
5. Based upon the above facts, the appellants was issued a show cause notice dated 13/08/96 raising demand of duty of Rs.99,60,733/- on the alleged ground that during the period 16/08/91 to 19/03/92, the appellants have cleared hand gloves/women condoms clandestinely without payment of duty. The notice also proposed imposition of penalty and confiscation of land, building, plant and machinery.
6. During the course of adjudication, the appellants contended that the women condoms were manufactured on trial basis in their plant as research and development but the same could not be commercialized and could not find place either in the Indian or in the overseas market for sale; that the female condoms were the invention of one NRI Doctor A.V.Reddy, who was not allowed to market the said product in USA; and both the Indian Council for Medical Research as well as Ministry of Health and Family Welfare found the same unacceptable and hence there was not question of selling this product in DTA; that the entry in the private records was initially made at the time of production and by the time the goods reached the final stage after inspection and quality control , most of them are rejected; there is very little local demand of gloves in India. The appellants being a 100% EOU is supervised by the Central Excise department, there is no scope for procurement of extra latex as the supply is governed by the Rubber board; that there is no other corroborative evidence in the form of sales bills; delivery challans, identity of customers, unaccounted payments, unrecorded orders, illegal procurement of raw materials; that the consumption of electricity for the period in question was comparable with the preceding and succeeding months and as such there was no additional consumption of electricity. They also referred to three dates i.e 10/02/92 to 13/02/92 and 19/02/92 where there was nil production as per their private record whereas in the statutory record production was shown. From this tried to conclude that the production was entered in RG-1 record and after the goods are tested and checked for quality control which may not be the same date when the goods were produced and entered in shift log. They also submitted that in 1990, question was raised in Lok Sabha regarding the suitability of condom under Indian conditions and in response the Ministry of Health & Family Welfare clarified that no study has been carried out to assess its suitability in India. The condoms are regulated by the Indian FDA within India and sale is not permitted without their approval. As their company had not applied for approval, there was no question of marketing female condoms in India. They also referred to the facts that female condoms require KY Jelly for lubrication and the chemicals required for the manufacture of KY Jelly were issued from bonded warehouse on 03/03/93, as such there is no question of manufacturing and marketing the same without basic raw materials.
7. The above contentions were not accepted by the Commissioner, who primarily went by the figures as recorded in private records and the difference between such figures with the entries in statutory records. However, he took into consideration some arithmetical errors and confirmed the duty to the tune of Rs.28,14,686/- in respect of the hand gloves and of Rs.18,42,946/- in respect of the female condom. Penalty of Rs. 10 lakhs was imposed on manufacturing unit along with imposition of personal penalty of Rs.1 lakhs on Shri S.Munshi, Managing Director of the company. He also confiscated land, building, plant and machinery with an option to the appellants to redeem the same on payment of redemption fine of Rs.5 lakhs.
8. We have heard Shri V.S.Nankani, Ld. Advocate appearing for the appellants and Shri Vimlesh Kumar, SDR appearing for the Revenue.
9. It has been strongly contended before us that the Commissioner has not taken into consideration the various pleas raised by the appellants. The appellants has categorically stated before the Commissioner that there is no market for hand gloves in India and they had not started commercial production for female condoms which require approval by Health authorities. It is sent that there is no rebuttal to the above pleas of the appellants by the Commissioner. It is also seen that almost all the persons, whose statements were recorded during investigation have clarified that the figures as recorded in production records or shift log cannot be taken as final figure, inasmuch as the goods need to go inspection and quality control test at various stages and it is only those goods which cleared such tests which are finally accepted and recorded in RG-1 register. The Commissioner has not taken into consideration the above deposition made by various persons at the time of recording the statements. We also note that the appellant's plea that the production reflection in shift log register is for all the three shifts whereas the inspection takes place only in one shift with the resultant back log. As such, it is not necessary that when the goods are produced and recorded in shift log register, the same are to be entered in RG-1 register on the same very day. This fact gets support from the appellants submission that though there was no production between 10/02/92, 13/02/92 & 19/02/92, statutory records showed the production. Thus it is evident that there is always a time gap between the actual production of goods and subsequent entry in records after undertaking the various processes of inspection and quality control. We also note that there is actually no evidence corroborating the allegation of clandestine manufacture and removal of the goods in the domestic market. It is well settled that the allegations of clandestine removal are required to be proved by the revenue by production of sufficient and tangible evidence. The difference in the figures of production records and statutory records having been explained satisfactorily by the appellants, the findings of the Commissioner as regards clandestine manufacture and removal of the same are unsustainable. We do not find any evidence produced by the revenue to that effect. Whereas the appellants, right from beginning in their various statements have clarified the position. The revenue has also not rebutted the appellant's stand that the female condom production was only on the basis for research and development purpose and was not having any market.
10. For the reasons recorded above, we set aside the impugned order and allow both the appeals with consequential relief to the appellants.