Customs, Excise and Gold Tribunal - Tamil Nadu
Sekar Match Industries vs Collector Of Central Excise on 12 December, 1989
Equivalent citations: 1990ECR616(TRI.-CHENNAI), 1990(48)ELT599(TRI-CHENNAI)
ORDER V.P. Gulati, Member (T)
1. These three appeals arise out of the common impugned order passed by the Collector of Central Excise, Madurai.
2. Brief facts of the case are that on a check of the appellants' factory premises the Central Excise authorities found that the work relating to frame filling of splints and box filling of matches was being carried on in these three units and there was no stock of essential raw materials like Chlorate, Sulphur, red-phosphorus, etc. nor the Central Excise statutory accounts were available in the premises. The authorities also found that there was no stock of any residuary chemical composition of match heads. The explanation given by the appellants was that the raw materials and accounts books were kept in the godown of M/s. Manohara Match Works, referred to as the main factory, and in their office (Manohara Match Works). The lower authorities charged the appellants that all the factories were working as one unit and that they were liable to pay higher rate of duty i.e., instead of Rs. 1.60 per gross Rs.3.50/4.50 per gross. The learned lower authority has held that since only the job of frame filling alone was being done in the 3 units and the other job of dipping of match head composition and dipping in the wax was not being done the manufacture of matches in fact was not being carried out in the 3 units. Since the appellants were all found to be related to the proprietor of M/s. Manohara Match Works, the lower authority concluded that all these three factories jointly produced matches outside their licensed premises and were doing only the work of box filling and were clearing all the matches at concessional rate. The lower authority, therefore, demanded the differential duty of Rs. 1,36,762.50; Rs. 1,61,787.50 and Rs. 1,43,262.50 from M/s. Sekar Match Industries, M/s. Thenmoli Match Industries and M/s. Shenbagalli Match Works respectively. A penalty of Rs. 2,000 was also imposed on each of the three appellants.
3. The learned Advocate for the appellants pleaded that the charges against the appellants have been upheld by the learned lower authority only for the reason that there was no stock of raw materials in the appellants' factories and also their account books were not found there and also that on the day of the visit of the officers the work of dipping of splints with the match head composition and with the wax was not being carried out. He pleaded that all the three appellants have been stated to have been related to proprietor of M/s. Manoharan in whose premises the raw materials were kept and in whose office the appellants' records were kept. He pleaded that there was no finding by the lower authority as to where the matches had been manufactured and by whom and merely on a presumption it has been held that all the three units were getting their matches manufactured together and no evidence has been brought on record regarding the place where matches were manufactured. He particularly pointed out that the proprietor of M/s. Manohara Match Works, where all the records were kept as also the raw materials, has not even been questioned and no charges have been made against him. He pleaded merely on presumption or suspicion the appellants cannot be found fault with.
4. The learned JDR for the Department stated that while there is circumstance of suspicion against the appellants, there was no information with him or in the records as to where the matches had actually been manufactured and he has no specific plea to make in regard to this missing link.
5. We observe this is a case where large tax evasion was indicated and the authorities felt that the matches were not in fact manufactured by the appellants but these were manufactured outside and clubbed the clearances of all the three units. We observe that no statement has been recorded from the workers to ascertain the nature of the operations carried out in each of the units on a regular basis nor the facts have been elicited as to wherefrom the match sticks actually emanated. The authorities could have ascertained from the workers as to whether they were getting the matches which had already been dipped and ready for putting in the box and whether any operation in regard to the dipping of the sticks with match head composition and also the waxing was being done in the respective units. The authorities have chosen not to even record a statement from the proprietor of M/s. Manohara Match Works in whose premises the raw materials and Central Excise records were found. The appellants have explained that for the sake of safety they were keeping the raw materials and the records in the premises where they were found. The owners of the units were found to be related persons and it is not unusual for one relation to help out the other. No doubt the circumstance of absence of evidence of dipping etc. in the units and also stocking of the raw materials and the records in the unit M/s. Manohara Match Works is a suspicious circumstance. This circumstance certainly warranted indepth probing by the authorities to unravel the nature of operations that were being carried out. The authorities, however, it appears, remained content with having brought on record the fact of the absence of dipping of the matches etc. and did not pursue the matter further to get the facts as to the nature of the operations which were being carried on a regular basis in the 3 units. They have been even remiss in not recording a statement from the proprietor of M/s. Manohara Match Works, who was in the facts and circumstances of this case an important link. No reason has been given as to why this could not be done. A suspicion cannot take the place of proof. Since the appellants were being visited with large duty liability, it is for the authorities to prove the case beyond any reasonable doubt. In the present case the authorities should have ascertained as to who were actually doing the operations of manufacture of matches. No effort appears to have been made in this direction. It is observed the units have been licensed by the authorities and it is only after they were satisfied that the appellants had the necessary infrastructure for the manufacture of matches that the licenses had been issued. Further, the Central Excise control over the match units is fairly rigid, being physical control, and it is not on record and nor it has been pleaded that on earlier visits by the officers the appellants were doing the same limited operations as were found to be done on the visit of the officers on 3-9-1985. In fact under the physical control system the day-to-day operations of the appellants' manufacture and clearances are under close supervision of the Central Excise authorities and unless it can be shown that the officers were in collusion with the appellants it will have to be presumed that the operations of the appellants were found to be in conformity with the law. The demand has been raised for a period of 3 years and there is no finding from the learned lower authority as to how the appellants inspite of close excise supervision got away with the removal of matches by paying lower rate of duty. The learned lower authority has not even adverted to the records of purchase and utilisation of raw materials and also whether on check of the same by the Central Excise authorities at any time during the past 3 years any discrepancy in regard to the same had been found and also whether there was any instance reported when the appellants were not found to have been manufacturing the matches as required under the law in their units for the purpose of clearance of matches at lower rate of duty. We further observe that no records or any accounts book showing that the appellants had been paying for the finished match sticks to any body have also been seized nor any evidence in this regard has been brought on record. The only finding given by the learned lower authority for raising the demands is as under :
"Hence when the main process of dipping of match head composition is not found and when it was found that there was no evidence to show these three premises are used in these process and when only the out workers job of frame filling is done in the premises, there is reason to conclude that the main two processes referred to above are being done only outside to these three premises and the further processes like box filling etc., are being done in the respective factories and cleared so as to claim concessional rate of duty prescribed under Notification No. 22/82. This fact is also substantiated by the facts that all the raw materials including chemicals found in the common godown of M/s. Manohara Match Works and all the accounts both Central Excise and other records are found in the office room of M/s. Manohara Match Works and the licensee of M/s. Manohara Match Works is nothing but her own son of the licensee of one of the factories. There is every reason to conclude that all these three factories jointly produced matches outside their licensed premises and doing the further processes of box filling and clearing the matches at the concessional rate."
It is clear that the learned lower authority has gone by the only single instance of the visit by the officers to the appellants' units and who found the absence of the dipping of the chemical mixture etc. and the signs thereof. The appellants before the lower authority had pleaded that the dippings were done in the units and dipping plates were clean because they had cleaned them after the day's work. The learned lower authority, however, has taken the nature of the manufacturing operations being carried out on the day of the visit by the officers along with the circumstance that the appellants were related to the proprietor of M/s. Manohara Match Works in whose premises the raw materials and records had been kept and, therefore, concluded that for the past 3 years the appellants had not been manufacturing any matches and had been doing the work of only box filling and not actually manufacturing match sticks. It is seen that the findings of the lower authority are based neither on any records seized nor any investigation done nor based on statement recorded from any body as to the nature of the operations carried out by the appellants. The lower authority's order obviously is based on assumptions and presumptions based on a suspicious circumstance of the nature of the manufacturing operations being carried out on a particular day cannot be taken to form the basis for demanding a heavy duty for the period of 3 years in the absence of any acceptable evidence. This is one case where we feel the concerned investigating officers should be called to question as to why they did not pursue the investigation further to bring out the facts as to the nature of the operations actually carried out particularly with the proprietor of M/s. Manohara Match Works and the various workers who were employed for doing the work in the three units. It is incumbent on the authorities to elicit all the facts through the investigation with a view to ensure that no evader of duty escapes for want of proper follow up investigation to get at the depth of the matter as also that no innocent person is subjected to unnecessary avoidable proceedings. In the present case we hold there has been a total failure on the part of the authorities in the matter of investigation and charges have been framed based on assumptions and presumptions. We, therefore, hold that the lower authority's order is bad in law and we set aside the same. The appeals of the appellants are, therefore, allowed.