Customs, Excise and Gold Tribunal - Mumbai
Camphor And Allied Products Ltd. vs Commissioner Of Central Excise on 21 November, 2003
Equivalent citations: 2004(177)ELT537(TRI-MUMBAI)
ORDER Moheb Ali M., Member (T)
1. On 24th April 1994 the Central Excise officers visited the appellants' factory who manufacture goods falling under Chapter 39, and found that RG23A Part-I register was incomplete and was not written from 1.4.1994 to 24.4.1994. They conducted stock taking of the raw materials and found shortages of raw materials, packing materials and modvat inputs when compared to the balance shown in RG23A Part-I. They also found inputs/raw materials in excess of what was shown in RG23 A Part-I. It was also found that the appellants have taken modvat credit in RG23A Part-II without making the corresponding entry in the Part-I in respect of five original duty paying documents. In the impugned order, duty was demanded on the alleged shortages to the tune of Rs. 3,41,459.57. The excess raw materials were confiscated under Rule 173Q(1) and a redemption fine of Rs. 10,000/- was imposed. A further duty of Rs. 67,141.61 was demanded on the inputs on which credit was taken in RG23A Part-II without making a corresponding entry in RG23A Part-I. In addition, interest was also demanded on this amount. The Commissioner also imposed a penalty of Rs. 50,000/- on the appellants under Rule 173Q(1) of the Central Excise Rules. The appeal is against this order.
2. It is an admitted fact that RG23A Part-I was not written from 1.4.1994 to 24.4.1994. The appellants plead that the register was incomplete because the dealing assistant was absent during the period. They contend that, according to the system of maintaining accounts in their factory, all raw materials received are recorded in the BIN cards in their stores department, and all issues were made from the stores on the strength of material requisition slips. They had explained this position to the visiting officers even when the panchnama was being drawn. Within four days of the visit of the officers, the appellants in their letter dated 28.4.1994 informed the department that the day-to-day entries of receipts and issues of raw materials were made by the stores department. The receipts and issues of raw materials were under cover of documents prepared by the stores department and that all these documents had been shown to the Excise officers. The panchnama did not indicate about any of these documents which were actually verified by the visiting Central Excise officers. The appellants admitted to the technical lapse of not maintaining the RG23A Part-f. They also admitted that they had taken credit of inputs in RG23A Part-II without making an entry in the Part-I register. It was their contention that had the officers taken stock of the raw material and compared that with the balance shown in the BIN cards and taken note of the issue slips, there would have been no shortages or excesses as alleged in annexures A & B of the show cause notice. The above letter dated 28.4.1994 went unresponded by the department. While replying to the show cause notice also, the appellants brought out the facts as reflected in the BIN cards and issue slips. The Commissioner while adjudicating the case did not give any cognisance to the various averments made by the appellants. In his findings, the Commissioner says, "I find that it is beyond doubt that whatever inputs/raw materials found in excess/shortage is correct and the same has been admitted in their submissions. The same fact has been mentioned in the panchnama." With regard to the averment that the RG23A Part-I remained incomplete because of the absence of the dealing assistant, the Commissioner observed that he did not accept the plea that the BIN cards and issue slips showed the correct position of the inputs received in the factory, as they were not authenticated by the officers and were not statutory records as per the Central Excise law. In other words, what the Commissioner was saying was that even if the BIN cards and issue slips showed the correct position of the stock of raw material on which modvat credit has been taken, he would not consider that to be sufficient evidence, as such documents were private records. He contended that as long as the statutory records do not reflect the correct position, action could be taken for the excesses and shortages. Insofar as the allegation that credit in respect of five original documents on which credit was taken in RG23A Part-II without making a corresponding entry in Part-1, his finding was that, according to the procedure laid down under Modvat Rules, first of all receipt of goods should be entered in RG23A Part-I and then the receipt specified in valid document and credit of duty should be entered in RG23A Part-II.
3. Heard both sides.
4. It is clear that the Commissioner's order is cursory, perfunctory and arbitrary. He does not give any valid reason as to why he does not rely on the evidence brought out by the appellants in the form of BIN cards and issue slips where in fact every raw material received was accounted for. He summarily rejects the evidence placed before him and says that the statutory records should be the sole basis for determining whether excesses and shortages are found or not. This is completely unacceptable. The appellants during the course of hearing have demonstrated as to how the shortages and excesses found in the annexure to the panchnama are duly accounted in the private records in the form of BIN cards and issue slips. They have explained as to how the accounts were not properly recorded in the RG23A Part-I. We have perused the various documents submitted before us which were earlier submitted to the adjudicating authority, and found that the shortages and excesses found during the course of the visit were based on RG23A Part-I entries which were incomplete and were not written from 1.4.1994 to 24.4.1994. The least the officers could have done was to ask the appellants to complete the record in their presence up to 24.4.1994 (the day of the visit of the officers) and then compare the physical balance with the one mentioned in RG23A Part-I. If the officers were to take the physical balance and compare it with the balance struck in the RG23A Part-I which were not written up-to-date, shortages and excesses are bound to be noticed. In fact the officers should have first completed the entries up to the date of visit and then take the stock of the inputs. Any irregularity found in the maintenance of RG23A Part-I, or for that matter, any statutory register, should be the starting point for investigation and the officers should find out whether any irregularities in respect of modvat credit were being committed. Instead the officers solely went by the register which was not written up-to-date and refused to verify any other material in the form of BIN cards and issue slips to find out the truth. After all, the purpose of any investigation is to find out the truth. The adjudicating officer also has committed the same lapse as of the officers in solely basing his findings on the basis of statutory records. While demanding duty of Rs. 67,141.61, the Commissioner observes that this duty is recoverable because the appellants have taken credit of this amount in their RG23A Part-II without making a corresponding entry in the RG23A Part-I. The whole exercise of the Commissioner appears to be only to confirm the allegations made in the show cause notice without going into the merits of the appellants' case. We find no justification for either demanding duty on the shortages of raw materials or confiscating the excess raw material or demanding duty or imposing penalties as has bee done by the Commissioner.
5. In view of the above observations, we find that the impugned order cannot be sustained. It is set aside. The appeal is allowed with consequential relief, if any.