Customs, Excise and Gold Tribunal - Mumbai
Rishi Packers Ltd. vs Commissioner Of Central Excise on 10 March, 1999
Equivalent citations: 2003(159)ELT1110(TRI-MUMBAI)
ORDER J.H. Joglekar, Member (T)
1. These three (Appeals) arise out of the same impugned order and are therefore, disposed of vide this common single order.
2. The appellant assessees factory was visited by the Jurisdictional Officers. The officers notice unrecorded stock of final goods kept in the BSR. These goods were confiscated, but permitted redemption on payment of fine. The officers also found final goods stored outside the BSR. These goods were seized. The Collector in the impugned order found that the goods were waste and directed recovery of Modvat credit taken in the inputs contained in such waste. The officers found certain shortages and excesses in the raw materials. Excess was found in LDPE granules as well as M.G. Kraft Paper. The Collector in the impugned order did not accept the arguments on the excesses but refrained from making any order in the absence of any proposal in the show cause notice. Shortages were found in raw materials namely LDPE granules and printing ink. In his deliberations, the Collector accepted the shortage in printing ink to be of 279 kgs. instead of 1403 kgs. shown in the panchnama. As regards LDPE he did not accept the subsequent reconciliation made by the assessees. Using an empirical formula, he held that out of this quantity of raw materials, plastic bags were manufactured and cleared clandestinely, and he confirmed duty amounting to Rs. 4,49,323/-. He imposed penalties on the three appellants, confiscated land, buildings etc. but permitted redemption thereof. These appeals arise out of this order.
3. I have heard Shri J.M. Patel ld. Advocate for the appellants and Shri A. Ashokan the ld. JDR for the Revenue.
4. As regards the excess of plastic bags in the BSR two claims were made before the Collector. The first was that the entry would be made after baling of the bags and the second was that since the unit was operating in all three shifts, the entry in the R.G.I was made at 5.00 p.m. everyday. The claim made is that the excess unrecorded stock was the production from the previous evening and in the morning on the date the officers made the visit the Collector held that the entry was required to be made as soon as the bags were manufactured without waiting for their being bared. He did not discuss the submission as to the single entry being made everyday for the production of the three shifts. Even otherwise it is futile to expect entries to be made in the case of commodity such as plastic bags when they are still in single pieces. Since the Collector has not met the valid point of the practice existing of making the entry in the afternoon only and since the unrecorded production the small in quantity suggestive of being manufactured in the previous shift, I hold that the charge against these goods in not established and that the orders of confiscation thereof do not survive.
5. While holding that the bags stored outside the BSR were scrap, the Collector has directed reversal of Modvat credit Shri Patel submitted that Rule 57-D specifically permitted non-reversal of the Modvat on the inputs contained in the scrap. This point has validity. I also find that the show cause notice does not make any allegation as to such reversal and therefore, the Collector was evidently went beyond the scope of the show cause notice. This portion of the order also does not survive.
6. As regards the demand of duty under Rule 9(2), I find that the Collector has not accepted the reconciliation subsequently undertaken by the assessees. He called it an after thought Shri Patel showed the. extract of the reconciliation exercise, where each entry was initialled by the Jurisdictional officers. He also relied upon the Judgment of the Tribunal in the case of Shamsons (I) Ltd. v. Collector of Central Excise - 1996 (85) E.L.T. 120. In which it has been held that the mere shortage in stock of raw materials by itself does not prima facie establish that goods have been manufactured and clandestinely removed. The ratio of the judgment would apply to facts of the case. I have also found that statement of Shri H.B. Patel does not amount to an admission that the goods were produced. He was merely estimating as to how many bags could be produced out of 1 kg. of LDPE which was used as a bonding material for paper laminated HDPE bags. I further find that although the printing ink was also found short, the Collector has not made any estimate of production of bags using that quantity found short as a basis.
7. For alleging clandestine removal the department has to place on record substantial evidence to corroborate the presumption arising out of shortage of any raw materials in the absence of any corroboration, the presumption and the orders translating the presumption into demand would not survive. This portion of the order also does not survive.
8. In view of the finding above there was no need for imposition of penalties on the appellant or for rendering to confiscation the land, buildings etc.
9. With these observations, I allow all the three appeals, set aside the impugned order and direct consequential relief.