Customs, Excise and Gold Tribunal - Delhi
Balls And Cylpebs Ltd. vs Collector Of Central Excise on 5 June, 1996
Equivalent citations: 1997(92)ELT496(TRI-DEL)
ORDER S.L. Peeran, Member (J)
1. This appeal arises from the order dated 21-9-1995 passed by the Collector (Appeals), Allahabad. By this order, the Collector (Appeals) confirmed the confiscation and granting option to release of the seized goods on payment of redemption fine of Rs. 40,000/- and penalty of Rs. 2,000/- imposed under Rule 226 of the Central Excise Rules, 1944.
2. The facts of the case are that on an information that the appellants are indulging in suppression of production of excisable goods and clandestine removal thereof, a team of Central Preventive Officers headed by Supdt. (CP) visited the factory premises of the party on 10-7-1994 and conducted physical stock verification of the finished goods as well as raw materials. On physical verification, a quantity of 7.410 MT of Balls and Cylpebs of alloy steel valued at Rs. 1,85,250/- involving Central Excise duty to the tune of Rs. 27,787.50 was found in excess of the recorded balance in RG 1. A physical verification report to this effect was prepared on the spot which was duly signed by the General Manager (Works) of the factory. The said General Manager (Works) in his statement dated 10-7-1994 admitted about the discrepancy and attributed the same due to the negligence of his employees while counting a number of the casting of Alloy Steel. As the explanation was not found satisfactory the officer on their own reasonable belief that the aforesaid quantity of 7.410 MT of Casting of Alloy Steel found in excess of the recorded balance of the RG 1 was manufactured and stored for clandestine removal with intent to evade payment of Central Excise duty and was therefore, seized the same under a Punchnama dated 10-7-1994 on the ground that the same is liable to confiscation for contravention of the provisions of Rules 53,173G and 226 of the Central Excise Rules. Thus, the show cause notice was issued calling upon them to explain as to why the goods should not be confiscated under Rule 173Q of the Central Excise Rules and why penalty would not be imposed under Rules 173Q and 226 of the Central Excise Rules, 1944.
3. The assessee submitted a detailed explanation denying that the goods were meant for clandestine removal. They had submitted that the officers had conducted weighment of various pieces of different weights as per 32 serial numbers resulting in total weight of 48.036 MT. This weight was ascertained by the officers by weighing one piece of each of the 32 items. For examples, against SI. No. 1, out of 177 pieces, the weight of one piece had been arrived at as 52 kgs. against SI. No. 2, out of 13 pieces, weight of one piece had been arrived at as 47.5 kgs. and so on. They had stated that no weighment sheet/chart in respect of the weighment of each piece of the 32 SI. Numbers had been made out, in support of the total weight of 48.036 MT allegedly found short by the officers. They stated that physical stock verification report dated 10-7-1994 the stocks from SI. No. 2 to SI. No. 8 were found in agreement when compared with the opening balance of 10-7-1994. Therefore, they stated that the department had adopted to standards in the case of finished goods. Therefore, they disputed about the excess of 7.410 MT is arbitrary and is not correct. They also submitted that no confiscation and fine could be leviable as the goods not meant for clandestine removal and they were all found in the bounded store room. In this regard, they also relied on several judgment. The Assistant Collector has noted all their pleas including the judgments cited. However, he has dealt with their contention and held that there was excess of 7.410 MTs of castings of alloy steel without accountal in the statutory records contravening the provisions of Rules 53,173G and 226 of Central Excise Rules, 1944. In this regard, he has also taken into consideration the statement of the General Manager. He has held that the goods had been manufactured on the specific orders of the customer as per specific drawings and therefore, question of variation in weight pieces to pieces does not arise. He has held that the customers were mainly cement factories and the grinding media is manufactured and supplied as per contracts made between them. Hence he has held that the method adopted by the officers for ascertaining the actual position which was agreed by the assessee themselves was quite correct and is beyond any dispute. Therefore, he has held mat the goods are liable for confiscation and for imposition of fine and penalty in the circumstances of the case. This finding was also not differ to by the Learned Collector in his order. Both the authorities have not discussed the judgments on this point.
4. Arguing for the appellants, the Learned Advocate submitted that the appellants would not prefer to contest the imposition of penalty in view of discrepancies found in the recording of the balance in the records. He submits that although penalty is imposable for improper maintenance of the records, as the goods were found in the bounded store room itself and in the absence of any evidence of clandestine removal or preparation made by the assessee for such removal or the goods not having been seized in such process of removal without payment of duty, therefore, the goods cannot be confiscated and hence imposition of penalty of Rs. 40,000/- involving duty amount of only Rs. 28,787.50 is not sustainable. In this regard, the Learned Advocate relied on several judgments cited in the order-in-original itself. He also relied on the judgment of the ratio of the following judgments :-
1. Garden Silk Mills v. Collector of Central Excise, 1991 (51) E.L.T. 373
2. M/s. Technical Associates (International) Ltd. v. Collector of Central Excise (Order No. A/1638/95-NB, dated 28-12-1995)
5. The Learned DR reiterated the findings given by the lower authorities.
6. The only question which has been raised before me is with regard to confiscation and imposition of fine of Rs. 40,000/-. The imposition of penalty is not contested and therefore, I confirm the imposition of Rs. 2,000/- penalty in the present case for improper maintenance of records. As regards the order of confiscation and granting an option given to the party to deem the seized goods on payment of fine of Rs. 40,000/-; the Learned Advocate has brought to my notice several judgments in this regard. It is seen from these judgments, that the goods can be confiscated only if they are final goods inasmuch as the goods should have been in the preparation for removal from the factory without payment of duty or they must have been seized while being transported without recovery or gate passes and without payment of duty and in circumstances, where they are still lying in the factory, the goods cannot be confiscated. This plea has been considered in the case of Garden Silk Mills v Collector of Central Excise as reported in 1991 (51) E.L.T. 373 (Tri.), New Polymer Industries v. Collector of Central Excise as reported in 1991 (52) E.L.T. 145 (Tri.), Western Transformer & Equipment v. Collector of Central Excise as reported in 1995 (9) RLT 175 and in the case of Pooja Forge Pvt. Ltd. v. Collector of Central Excise as reported in 1996 (84) E.L.T. 37 (Tri.). In the case of Garden Silk Mills, the Tribunal held that the imposition of penalty is justified when the goods have been found to have not properly accounted for. However, in the absence of any clandestine removal as the goods are still within factory premises and no attempts for clandestine removal had been made, therefore, the Tribunal set aside the order of confiscation in the light of the judgment rendered in the case of Southern Steel Ltd. v. Union of India as reported in 1979 (4) E.L.T. (J 402). This citation and that of New Polymer Industries have been taken noted of in Western Transformer & Equipment and the Tribunal has held that the seized transformers had been reached RG 1 stage and in that view of the matter, set aside the confiscation and the fine in view of the confiscation imposed by the lower authorities. These judgments were again followed in the case of Pooja Forge Pvt. Ltd. In Pooja Forge Pvt. Ltd.'s case the department found on physical verification carried out in respect of finished goods namely, nuts, bolts and screws in the factory had found the same in excess of the recorded balance in RG 1 register. The department had also relied on the statement of Director of the firm. The Tribunal on appreciation upheld the imposition of fine, in the light of the judgment in the case of Indian Cork Mills Ltd. v. Collector of Central Excise as reported in 1984 (17) E.L.T. 513 (Tri.) and that of Snack Foods Pvt. Ltd. v. Collector of Central Excise as reported in 1987 (31) E.L.T. 231 (Tri.). The findings recorded by the Tribunal in para 5 to para 7 are noted herein below :-
"5. I have carefully considered the submissions made by both the sides and have perused the record. In the present case the contention; of the appellants is that the goods have not reached RG 1 stage inasmuch as they were still lying in the finishing room. They were required to have been weight, sorted out, packed in gunny bags or cartons as the case may be and thereafter the details would be entered in RG 1 register. On this ground, I notice that the column 15 of RG 1 deals about the goods lying in finishing room. The Learned DR is correct in his submissions that the quantity lying in finishing room should have been entered into including the pending balance in column 2. As regards non-entering of balance in column 2, the Learned Consultant submitted that no balance was available as the same was being removed on the same date. If this be so, then the goods of 9-10-1992 were still remaining in factory on 10-11-1992. Hence this plea cannot be accepted. Therefore, it is clear that there has been non-entry in the RG 1 register in the manner in which it is required to be done. Therefore, the allegation of non-maintenance of register is upheld and hence I hold that the penalty imposed in this regard is sustainable.
6. As regards confiscation of the goods and imposition of fine is concerned, the Learned Consultant has taken the plea that confiscation of goods lying in finishing room in unpacked condition without having been reached the RG 1 stage is not sustainable. In this regard he has relied on two judgments. He also pointed out from these judgments that for the purpose of confiscation, the department has to show that the assessee has clandestinely removed or attempted to remove the goods. The Learned DR submitted that it is not necessary to show that there has been any attempt to clandestinely remove the goods but once the entries are not done then that itself is a ground for confiscation.
7. I have carefully considered this plea and I have seen the citations noted by both the sides. In the case of Indian Cork Mills Ltd. (supra) relied by the Learned DR, it is noted that the party had already removed the goods and in some cases the party had already loaded the goods in a lorry and was about to remove the goods when the lorry were seized. It was found that the goods were not covered with proper documents and in such circumstances, it was held that confiscation in such a case is proper as there was an attempt for clandestine removal. In the case of Snack Foods Pvt. Ltd. (supra) the Tribunal has noted about the non-entry of goods in the statutory records, and held that the party is liable for penal action as per Rule 173Q of Central Excise Rules. Further it was held that the party had even admitted about removal of the goods and the seized lorry was loaded with an unaccounted goods, well packed and ready for removal. Hence such goods were held to be confiscable as the assessee had also admitted to have removed those goods in a fully packed condition. In the present case there is no attempt made by the assessee to remove the goods as they were still lying in the finishing room. In that circumstances, applying the ratio of the Western Transformer & Equipment (supra) and Garden Silk Mills, the confiscation and imposition of fine in respect of goods still lying in the finishing room is not sustainable and that portion of the order is set aside. With these modifications the other penalty imposed for non-maintenance of the register is upheld."
7. In the present case as noticed, the department has not found any clandestine removal or preparation having been made for .such removal. In the circumstances, the confiscation of seized goods and granting an option to redeem on payment of Rs. 40,000/- is clearly unsustainable in the light of the judgments referred to above. Applying the ratio thereof, the order of confiscation and granting an option to redeem the same on payment of Rs. 40,000/- fine is set aside. However, the penalty of Rs. 2,000/- imposed is confirmed in the facts and circumstances of the case.
8. Ordered accordingly.