Customs, Excise and Gold Tribunal - Mumbai
Pratibha Silk Mills vs Collector Of Central Excise on 20 May, 1988
Equivalent citations: 1989(20)ECR307(TRI.-MUMBAI), 1989(39)ELT118(TRI-MUMBAI)
ORDER K. Gopal Hegde, Member (J)
1. Both these appeals arise out of and are directed against Order-in-Original bearing No. S/MP/84 dated 20.10.1984 passed by the Additional Collector of Central Excise & Customs, Vadodara.
2. The Appeal CD(BOM) of 1984 is by the assessee and it was directed against that part of the order of the Additional Collector by which he imposed certain fine amounts, demanded duty as well as imposed penalty of Rs. 7,500/-.
3. The Appeal ED(BOM) 11 of 86 is by the Collector of Central Excise & Customs, Vadodara, who was directed to make an application by the Central Board of Excise and Customs under Section 35E(1) of the Central Excises and Salt Act (for short the Act).
4. As these appeals involve common questions of law and facts, they are clubbed together, heard together and hence this common order.
5. The brief facts necessary for the disposal of these appeals are :-
The appellants M/s. Pratlbha Silk Mills (to be hereinafter referred to as "Assessee") were during the relevant period engaged in the manufacture/processing Art Silk Fabrics falling under Tariff Item No. 22(1) (b) of First Schedule to the Central Excises and Salt Act, 1944. On 30.9.1983 the Central Excise Preventive Officers of the Collectorate Headquarters, Baroda visited the factory premises and undertook the scrutiny of the statutory records. Since they found several discrepancies and irregularities they drew up a detailed panchnama. They also recorded statements of the available persons.
6. In the follow up action, the said officers carried out search of the mill premises of M/s. Pratibha Silk Fabrics/Gyanesh Silk Mills, Surat and also searched the premises of M/s. Abhishek Silk Mills, Surat. In both the premises they found certain man-made fabrics not covered by duty paid documents and they seized the fabrics and also recorded the statements of the persons concerned.
7. After the completion of the investigation, a show cause notice dated 22.3.1984 was issued to the assessee alleging contravention of the provisions of Rule 9, 173F read with Rule 9(1), Rule 173G(2) read with Rule 52A, Rule 173G(4) read with Rule 53 and Rule 226 of Central Excise Rules,1944 (for short the Rules) calling upon them to show cause against the confiscation of 145 pieces admeasuring to 11459 LMts. processed, valued at Rs. 1,82,197.10 and six pieces of crimped voil admeasuring to 600 L. Mtrs. valued at Rs. 9390.00; excisable goods admeasuring to 2189.75 LMtrs. valued at Rs. 45,122.00 seized from the possession of M/s. Pratibha Silk Fabrics/Gyanesh Silk Mills, excisable goods admeasuring to 566 L Mtrs. valued at Rs. 11,320/- seized from the possession of M/s. Abhishek Silk Mills and also demanding duty on 65069 L Mtrs. of processed man-made fabrics valued at Rs. 10,51,644.76 processed in the factory and removed by them and further, calling upon them as to why penalty under Rule 173 Q(1) of the Rules should not be imposed.
8. The assessee filed a detailed reply refuting all the allegations.
9. The Additional Collector of Central Excise & Customs, Vadodara, who hold the enquiry, after consideration of the reply to the show cause notice and after affording personal hearing, firstly held that the charge of non accounting of 145 pieces admeasuring to 11459 L. Mtrs. in RG-1 was established.
10. The assessee challenged this finding of the Additional Collector. The Board, which had directed the Collector to file the application before the Tribunal which was to be treated by the Tribunal as appeal did, however, not challenged this finding, nor did they contend that the Additional Collector ought to have ordered confiscation. Therefore, the only question for my consideration is whether the Additional Collector was not justified in holding that the charge of non accounting of production in RG-1 stood proved.
11. Undoubtedly, during the visit of the Central Excise Officers, they found that the RG-1 was written upto 29.9.1983. In RG-1 there was no entry regarding 145 pieces admeasuring to 11459 L Mtrs. which were found lying in the factory premises in fully manufactured and in ready to despatch condition. But then, the assessee's explanation was that the entire quantity was manufactured after 29.9.1983 and before the arrival of the Central Excise Officers. The entry in RG-1 is normally made at the end of the day but since the officers came during the day itself the entry could not be made. The assessee also relied on the Notification No. 79 of 82 dated 28.2.1982 which prescribed the stage at which the entries in RG-1 was to be made. As per the said notification in respect of man-made fabrics, it is only at half loom stage in respect of grey fabrics and after folding and measurement in respect of processed fabrics. It is true that in the panchnama there is a recital that this quantity was manufactured before the visit of the Central Excise Officers. But then, the assessee had contended that that statement was inserted subsequently by the officers. The Additional Collector in his order did not go into the question as to whether the assessee's contention that those goods were manufactured on 30.9.1983 was correct or not. He categorically recorded a finding that there was no illicit removal. Without considering the merit of the assessee's claim, the Additional Collector was not justified in rejecting the explanation particularly having regard to the stage at which the entry in RG-1 is required to be made for processed man-made fabrics. Therefore, I am inclined to accept the contention of the assessee that the Additional Collector committed an error in holding that the charge of non accounting of production of 11459 L. Mtrs. found in the factory premises stood proved I, therefore, set aside that part of his finding.
12. The second charge against the assessee was non accounting of six pieces of crimped voil admeasuring to 600 L. Mtrs. The Additional Collector accepted the assessee's explanation and held that this charge had not been proved. The Board which directed the Collector to make an application did not contend that this finding of the Additional Collector was erroneous. Therefore, I am not required to examine the correctness or otherwise of this finding.
13. The third charge against the assessee was that there was 9 duplicate chal-lans and under the guise of duplicate challans illicit processing and illicit clearing were done. The adjudicating authority exonerated the assessee of this charge. The Board which directed the Collector did not contend that the Additional Collector committed any error in law or on facts in exonerating the assessee of this charge. Therefore, I am not required to go into the correctness or otherwise of this charge.
14. The fourth charge against the assessee was that they had received 126 pieces of grey man-made fabrics admeasuring to 12,900.75 L Mtrs. valued at Rs. 1,79,937.52 covered under 10 challans which were not accounted for. Further, the goods covered under the said challans were also not available in the factory premises either in the grey form or semi-processed form or in any form. The assessee had denied this charge. They had contended that the grey fabrics received were detained by the Supdt. before the visit of the Central Excise Officers. This fact had been brought to the notice of the Dy. Collector Preventive by their letter dated 14.10.1983. It was their contention that the detention made earlier was illegal and they had requested for unconditional release and the detention order had been subsequently revoked.
15. The Additional Collector did not accept the assessee's explanation. He first held that the charge of non-accounting was proved and secondly held 'though there is no positive evidence brought on record through investigation regarding illicit processing and illicit clearance of the goods covered by these 10 challans, it can be reasonably presumed that the said goods have been cleared without payment of duty". Having regard to his said finding the Additional Collector had directed payment of duty at appropriate leviable rate. The very order of the Additional Collector indicates that there was no positive evidence regarding illicit processing and illicit clearance of the goods covered by 10 challans. Despite such a finding the Additional Collector proceeded to hold that there was removal without payment of duty. This finding is an assumption which the Additional Collector himself had stated that it was a reasonable presumption. It is the department which had alleged that the assessee had received 126 pieces of grey fabrics admeasuring 12,900.75 L Mtrs. and the same had not been accounted for. The further allegation was that 126 pieces had been clandestinely removed without payment of duty. The initial burden of establishing both the allegations was on the Department. No enquiry had been made from whom those 126 pieces of grey fabrics were received. No enquiry was also made as to whether the persons who had sent those fabrics for processing had received back after processing. In support of their contention the appellants had produced affidavits of the parties who supplied the grey fabrics for processing and also regarding receipt of the fabrics after processing. The appellants have further established that prior to 30.9.1983 the Central Excise Officers had passed a detention order in respect of the same fabrics and subsequently unconditionally lifted the detention order. The adjudicating authority had not given any reason for not accepting the sworn statements of the supplier of the grey fabrics. There is considerable force in the contention of the assessee that the finding regarding the illicit removal without payment of duty is based on surmise and not on evidence. As a matter of fact, as stated earlier the Additional Collector himself says "no positive evidence was brought on record through investigation regarding illicit processing and illicit clearance". If that be so, his further finding that "it can be reasonably presumed that the said goods have been cleared without payment of duty" is nothing but a surmise and therefore, I unhesitatingly set aside that part of his, order and consequently the demand of duty made in respect of 12900.75 L. Mtrs. covered by 10 challans.
16. The fifth charge as to the illicit processing and illicit clearance of man made fabrics of 38,449.5 L Mtrs. was held to be not established. The Board which directed the Collector to file the application did not challenge that part of the finding of the Additional Collector. In the circumstances, it is unnecessary for me to go into the correctness or otherwise of his finding.
17. The next charge alleged against the assessee is removal of 2189.75 L Mtrs. of processed man-made fabrics valued at Rs. 45,122/- seized from the possession of M/s. Gyanesh Silk Mills and the last charge as to the seizure of 566 L Mtrs. valued at Rs. 11,320/-seized from the business premises of M/s. Abhishek Silk Mills. The Additional Collector had ordered confiscation but allowed redemption on payment of fine of Rs. 4500/- and had also demanded duty in respect of 2189.75 L. Mtrs. seized from M/s. Gyanesh Silk Mills. He had also ordered confiscation of 566 L. Mtrs. seized from M/s. Abhishek Silk Mills but allowed redemption on payment of Rs. 1000/-. The Board which directed the Collector to file the application did not contend that the fine levied in lieu of confiscation was low in respect of both the quantities. The assessee however had challenged the demand of duty from them in respect of the said two seizures. Their contention was that the duty, if any, should be demanded from the mills from whose premises they were seized and not from the assessee. Their further contention was that the adjudicating authority ought not to have relied on the statements of partners of M/s. Pratibha Silk Mills as well as M/s. Abhlshek Silk Mills to demand duty from the appellants. It was also contended that once the excisable goods leave the factory premises there is a presumption as to the payment of duty and that presumption had not been rebutted.
18. Though the arguments addressed on behalf of the assessee appears attractive one cannot loose sight of the fact that M/s. Pratibha and M/s. Abhishek Silk Mills are sister concerns of the assessee. Therefore, if the responsible persons of the said mills at the earliest instance Implicated the assessee and have categorically stated that the goods seized from their premises are without gate pass or without payment of duty finding of the Additional Collector In respect of those two quantities cannot be seriously challenged or assailed. I, therefore, confirm the said findings.
19. The only other aspect that remains for consideration is about the prayer of the Collectdr requiring enhancement of penalty on the appellants.
20. From the Board's order dated 18.10.1985 it is seen that the Board proceeded on the wrong assumption that the assessee had removed the excisable goods of the total value of Rs. 4,10,576.62 without accounting In a statutory records and without following Central Excise procedures and without payment of duty and as such the Imposition of penalty of Rs. 7500/- by the Additional Collector was not proper and inadequate and there should have been higher penalty on the assessee.
21. As has been stated earlier except regarding the quantum of penalty the Board did not challenge any of the other findings of the Additional Collector. The Board also did not contend that the fines Imposed in lieu of confiscation were either low or Inadequate. Now as per the Additional Collector's order total duty payable comes to Rs. 14,400/- and odd. The amount of fine levied and the penalty imposed by the Additional Collector comes to Rs. 31,000/- and odd. Thus the penalty imposed, if the fine is also taken into consideration, works out to more than 200% of the duty attempted to be evaded. If that be so, it is not clear how the Board could reasonably come to the conclusion that the quantum of penalty on the assessee was low and there should be an increase in the quantum of penalty.
22. It Is necessary to observe that the Board before directing the Collector to make an application under Section 129-D of the Act ought to have examined the correctness or otherwise of the findings of the Additional Collector. Under Section 35-E(1) the Board was required to examine the records of the proceeding in which the adjudicating authority has passed the order or decision for the purpose of satisfying itself as to the legality or propriety of the order. While exercising this power, the Board is required to consider not only the Interest of the revenue but also the interest of the assessee. The assessee could also move the Board to exercise their power under Section 35-E(1). The Board is expected to act in a fair just and proper manner so that no injustice is done to the assessee also. Therefore, before directing the Collector to make the application, the Board was required to examine the legality or propriety of the framing of the adjudicating authority. If the Boasd finds that certain of the findings of the adjudicating authority which went against the assessee were either illegal or improper, the Board would be justified in directing the Collector to make an application to the Tribunal for correcting illegality or impropriety.
22A. Since the fine and penalty imposed by the Additional Collector works out more than 200% of the duty attempted to be evaded, I see no justification to enhance the penalty. That apart by reason of my findings the duty liability gets reduced and the fine amount of Rs. 18,000/- required to be set aside. On this ground also there is no good reason to grant the prayer made by the Collector in the appeal.
23. In the result, the appeal filed by the Collector, namely, E0(B0MA11) of 1986 is rejected.
24. The appeal filed by the assessee is allowed in part. The confiscation of 11459 L Mtrs. seized from the possession of the factory and released on payment of fine of Rs. 18,000/- is set aside. The fine, If paid, shall be refunded to the assessee. The demand of duty made in respect of 12,900.75 L Mtrs. covered by 10 challans is also set aside. The duty, if paid, shall be refunded to the assesses. In other respects, the order passed by the Additional Collector is confirmed.