Customs, Excise and Gold Tribunal - Delhi
Lalit Chordia, Director And Ratanmani ... vs Commissioner Of Central Excise on 30 May, 2002
Equivalent citations: 2002(82)ECC824, 2002(150)ELT584(TRI-DEL)
ORDER Krishna Kumar, Member (J)
1. These are the two appeals filed against the common order dated 15.5.2001 passed by the Commissioner (Appeals), Central Excise, Jaipur. The period of dispute in both the appeals is April 1997. The duty demand of Rs. 1,17,436 has been confirmed and an equal amount of penalty under Section 11 AC of the Central Excise Act, 1944 has also been imposed. A penalty of Rs. 10,000 has been imposed on Shri Lalit Chordia, Director of the appellants under Rule 209A of the Central Excise Rules 1944 on the ground that the appellants had clandestinely removed the excisable goods without payment of Central Excise duty.
2. Shri Bipin Garg, Advocate, appearing on behalf of the appellants submitted that the appellants are engaged in the manufacture of marble slabs/tiles classifiable under Chapter Heading 25 of the Schedule of the CETA, 1985. The officers of the respondent visited the factory of the appellants on 15.10.97 and checked various records being maintained by them. The RG-1 register of the appellants was showing stock balance of finished goods as on 15.10.97 as under:
1. Irregular marble slabs 16304.53 sq. mtrs.
2. Regular marble slabs 1082.87 sq. mtrs.
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Total 17907.40 sq. mtrs.
The officers conducted physical stock verification of finished goods lying in the factory premises of the appellants in the presence of Shri Lalit Chordia, Director of the appellants company and two independent witnesses and found stock of finished goods as under:
1. Irregular marble slabs 12738.72 sq. mtrs.
2. Regular marble slabs 1254.14 sq. mtrs.
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Total 13992.86 sq. mtrs.
3. Thus, the officers noted shortage in the stock as under:
1. Irregular marble slabs 3565.81 sq. mtrs.
2. Regular marble slabs 348.73 sq. mtrs.
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Total 3914.54 sq. mtrs.
The statement of Shri Lalit Chordia, Director was recorded on 15.10.97 in which he stated that their unit is new and there remained arithmatic errors in measurements taken at the time of entering production and at the time of clearance of goods. Learned Advocate contended that the mandatory penalty was imposed on the appellant company on the ground of clandestine removal, but the finding of clandestine removal of goods was based on a presumption. The adjudicating authority presumed clandestine removal on the basis that the appellants' product viz. "marble slabs" was a highly evasion prone commodity. The lower appellate authority simply presumed clandestine removal on the basis of shortage. Neither of the authorities had found any evidence of clandestine removal to support the finding. On this basis, the learned Advocate submits that the mandatory penalty is unsustainable. He drew my attention to the show cause notice as well as the Order-in-Original and submitted that no evidence has been brought on record to prove clandestine removal. Besides, he also submitted that the stock of goods is kept in the shape of irregular slabs, area of which is calculated on the basis of maximum height, width and the length of marble block sawn. The maximum height, width and length of the block is measured before mounting the said block on the trolly for the purpose of sawing and the area calculated on the basis of the said parameters is entered in the RG-1 register as the area of the sawn irregular marble slabs at the end of the day. However, for the purpose of assessment to duty at the time of clearance of such irregular marble slabs, the assessable area is calculated as per the formula given against SI. No. 18 of the table to Notification 5/97 dated 1.3.97 and the shortages are now attributed to these factors. Therefore, he contended that the shortage was as a result of wrong measurement. He forcefully contended that there is no evidence on record for clandestine removal, the same is based on presumption only. 100% penalty has been imposed under Section 11AC of the Central Excise Act which is no justified. In support of his contention with regard to clandestine removal, learned Advocate referred to the case of M/s. Associated Cylinder Industries Ltd. wherein this Tribunal has held that in the case of clandestine removal, the difference between RG-1 balance and the physical stock, incomplete or improper maintenance of prescribed records alone is not sufficient proof of clandestine removal. Direct physical evidence is required or sufficient circumstantial evidence is required to show clandestine removal (para 19). Similar views were also held in the case of M/s. Sayaji Iron and Engineering Co. Ltd. . Besides, he also referred to the Notification 5/97 issued by the CBEC pointing out that against SI. No. 18, it is written that when it-is in irregular shape, exact quantity cannot be ascertained. He also contended that no enquiry has been made in the matter. As regards the mandatory penalty, he submitted that the mandatory penalty does not mean that equal amount of penalty can be imposed. In this regard, he relied on the decision in the case of M/s. Escorts JCB Ltd. and submitted that it is not mandatory that in all cases, maximum penalty should be imposed. The authority has a discretion to impose lesser penalty. Learned Advocate relied on the decision in the case of M/s. UP State Sugar Corporation Ltd. wherein the learned Single Member has inter-alia held that where the issue of clandestine removal is involved, the burden of proof of proving clandestine removal lies on the Department. In the present case also, it not in dispute that the burden of proof of proving clandestine removal is on the Department and that the Department has failed to bring in any tangible evidence on record to prove' the clandestine removal. As such, he contended that the penalty is not warranted in the case. He also relied on the decision in the case of M/s. Telemechanique & Control (I) Ltd. emphasising that malafide intention is required to be proved for clandestine removal to impose penalty. No such allegation has been made in the show cause notice, as such the penalty is not warranted. Further with regard to the penalty of Rs. 10,000 on the Director, Shri Lalit Chordia, he submitted that no specific contravention warranting imposition of penalty under Rule 209A has been mentioned and in the absence of specific contravention, the penalty cannot be imposed on the Director. He further submitted that no allegation has been made against the Director in the show cause notice. He drew my attention to pages 25, 26 and 27 of the reply on behalf of the company and particularly the paras 5 and 6 thereof and submitted that in the case of irregular marble slabs, the assessable area is calculated as per the formula given against SI. No. 18 of the table below Notification 5/97 dated 1.3.97. The formula is reproduced below:
If a manufacturer clears irregularly shaped marbles, he shall have the option to discharge the duty on the slabs by treating one cubic metre of marble blocks as equivalent to 30 square metres of marble slabs, the volume of the blocks being determined with reference to the maximum length, width and height of the block.
Even though the area is calculated on the basis of maximum height, width and length was accounted for in the RG-1 register which was removed as such at the area calculated according to the above said formula was debited in the RG-1 register. It may be submitted with stress that the formula for calculation of assessable area shown against SI. No. 18 of the table below Notification No. 5/97-CE dated 1.3.97 is applicable only for the clearances of irregular shaped slabs and this formula has nothing to do and has no applicability for the purpose of accountal of irregular marble slabs in the RG-1 register. Hence the difference in the physical stock and the recorded balance of stock in the RG-1 register. In this regard, he submitted that no finding has been given by the lower authorities on this submission and for that reason also the impugned order cannot sustain. The learned Advocate also relied on the decision in the case of M/s. Universal Polythene Industries to the effect that it is well settled that the charge of clandestine removal and clearances is a serious charge against the manufacturer which is required to be discharged by the Revenue by production of sufficient and tangible evidence. He forcefully contended that since no corroborative or tangible evidence has been brought on record, the Revenue has utterly failed to prove the clandestine removal.
4. Shri A.S. Bedi, learned SDR has appeared on behalf of the Revenue and he submitted that the appellant was working under self removal procedure and there is no control of the Department. This procedure gives liberty to the appellants. In his statement, the Director has admitted the shortages. He drew my attention to the reply to the show cause notice at page 14 in this regard. The learned SDR submitted that no figures of arithmatic errors have been given and the shortages are not disputed. Besides, no satisfactory explanation has been given in the matter. As regards the Notification he pointed out that the maximum height, width and length of the block is measured before mounting the said block on the trolly and the area calculated on the basis of the said parameters is entered in the RG-1 register as the area of the sawn irregular marble slabs at the end of the day. However, for the purpose of assessment to duty at the time of clearance of such irregular marble slabs, the assessable area is calculated as per the formula given against SI. No. 18 of the table to Notification 5/97 dated 1.3.97 and the shortages are now attributed to these factors. The contention of the appellants is not acceptable as the entry No. 18 of the said table to Notification 5/97 which prescribes duty on irregular marble slabs also lays down that the volume of the blocks is to be determined with reference to maximum length, width and height of the block. He further submitted that the maximum penalty imposed on the company is fully justified and as regards the Director, since he has admitted shortages in his statement, the penalty of Rs. 10,000 imposed on him is very nominal and has been correctly imposed.
5. After hearing the rival submissions and perusal of the records and the case laws, I find that in order to prove the charge of clandestine removal, it is necessary that some direct and tangible evidence should have been brought on record by the Department which admittedly the Department has failed to bring on record because the orders of the lower authorities themselves are based on the presumption Therefore, in my opinion, the charge of clandestine removal has not been established and as such the impugned order cannot sustain. Accordingly, the impugned order is set aside and the appeals are allowed.