Custom, Excise & Service Tax Tribunal
Commissioner Of Central Excise, Thane I vs Sharda Synthetics on 4 August, 2011
IN THE CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH AT MUMBAI
Appeal No. E/467/99
(Arising out Order-in-Appeal No. YPP/1009//M.III/98 dated 2910.1998 passed by the Commissioner of Central Excise (Appeals), Mumbai)
For approval and signature:
Honble Mr. S.K. Gaule, Member (Technical)
1. Whether Press Reporters may be allowed to see
the Order for publication as per Rule 27 of the
CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication
in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy
of the Order?
4. Whether Order is to be circulated to the Departmental
authorities?
Commissioner of Central Excise, Thane I
Appellant
Vs.
Sharda Synthetics
Respondent
Appearance:
Shri Y.K. Agarwal,SDR for the appellant Shri Vishal Agarwal, Advocate for the respondent CORAM:
Honble Mr. S.K. Gaule, Member (Technical) Date of hearing : 04.08.2011 Date of decision : 04.08.2011 O R D E R No:..
Heard both sides.
2. This appeal has arisen consequent to Hon'ble High Courts order dated 18.1.2010 in case of appeal filed by the department against this Tribunals order no C-IV/259/03 dated 2.12.2003. The Hon'ble High Court remanded the case back to Tribunal for consideration, afresh. Revenue had earlier filed appeal against the OIA no YPP/1009//M.III/98 dated 2910.1998 whereby Commissioner (Appeals) has upheld the Additional Commissioners order.
3. On the last date of hearing, ld. SDR requested for time for submitting copy of show-cause notice and various other documents. Today the ld. SDR could not produce the said documents. From the records available, briefly stated facts of the case are that the officers of Central Excise carried out a search at the factory of the respondent who are engaged in the processing of cotton and man made fabric heading 52, 54 and 55 of CETA, 1985. During the preventive check and during round of the factory they also found bales being loaded in a lorry MH04 C 9951. About 28 bales were already loaded and 33 were waiting for loading. The bales appeared to be unaccounted in RG1 register though the delivery challan were prepared for the same. The said bales totalling 299254 valued at Rs.54,08,473.56 were seized and the lorry was also seized. The lower adjudicating authority on adjudication of the case held that the goods are not liable to confiscation along with lorry in which certain portion of the goods were seized. However, he imposed a penalty of Rs.10,000 on the respondent and the personal penalty of Rs.10,000/- on the director of the respondent. Aggrieved by this order, department filed appeal. Commissioner (Appeals) upheld the adjudicating authoritys order. Hence revenues appeal. However, penalty imposed on the director of the respondent is not subject matter of this appeal.
4. The contention of the revenue is that the excess stock was found in a room adjacent to the BSR and some of the finished goods were found in the lorry and that respondent could not furnish any evidence that the lorry was not being loaded outside the factory. The contention is that the respondent could not produce any evidence that they were permitted to make a single entry. Ld. SDR also pointed out that for making entries procedure has been prescribed by the Trade Notice issued from time to time and the respondent failed to show any evidence regarding any permission taken in this regard. The respondent could not produce any evidence that the lorry was not being loaded outside the factory.
5. Ld. Counsel Shri Vishal Agarwal for the respondent submitted that it is clear from the brief facts recorded in the order in original that the lorry was within the factory as the factory records show that during the round of the factory they have also found bales were loaded in the lorry. The contention is that delivery challan were also prepared which is also clear from the facts recorded in the OIO. Ld. counsel also brought to my notice the provisions of Rule 173Q (i)(b) according to which non-accountal does not amount to confiscation. He further submitted that raw material was duly accounted for in the records which goes to show that they have to account it for production of finished goods and thus there cannot be any clandestine removal. In support of his contention that non-accountal is not liable to confiscation he cited Tribunal decision in the case of CCE vs. Continental Chemicals 2002 (140) ELT 116 (Tri-Mum).
6. I have carefully considered the submission and perused the records. This is second round of litigation. In the first round the main thrust of the revenues was that non-accountal of finished goods in RG1 register is a procedural lapse, is not correct and the Commissioner (Appeals) did not consider the fact that in textile industry trade has been well informed that RG 1 stage of processed fabrics. The thrust of the argument had also been that while deciding the appeal against lower adjudicating authoritys order the ld. Commissioner (Appeals) has not considered the ground of appeal of the department nor the case law cited by the department. The substantial question of law raised before the Hon'ble High Court was as under:-
Whether the Clearing/removal of the goods without entry of the same in the RG-1 register would amount to clandestine removal so as to make the goods liable for confiscation and penalty under the Central Excise Act? The ld. counsel appearing before the Hon'ble High Court also cited Tribunal decision in the case of M/s. Indian Cork Mills vs. Commissioner of Central Excise, Bombay 1984 (17) ELT 513 (T). Now the ld. SDR has contended that the respondent have not been able to show that the lorry was not loaded outside the factory and he also contended that the respondent are not able to show any evidence that they were permitted to make a single entry. The answer to the proposition regarding the place of loading lie in the para 2 of the order in original, since the department could not produce copy of show-cause notice. The relevant para 2 of order in original is reproduced hereunder:-
During this check, on the strength of a search warrant, a stock challenging and verification of all Central Excise records was conducted by the team. The stock verification revealed that adjacent to the BSR on 2nd floor in a room, stock of finished fabrics packed/semi packed in polyethene bags or in jute bags was lying. The bags did not bear any bale number or lot number on fabrics. During round of the factory, they also found bales being loaded in a lorry number MH 04-C 9951. About 28 bales were already loaded & 33 bales were waiting for loading. The bales appeared to be unaccounted for in RG1, though delivery challans and invoices were prepared for them.
So far as apprehension that respondent failed to produce any evidence that the lorry was not being loaded outside. From the expression used in the above facts of the case recorded in the Order in Original is during round of the factory and not around the factory Therefore the same cannot be held to be being loaded outside the factory. Therefore the apprehension of the department that the respondent could not show any evidence that lorry was not being loaded outside the factory is not based on any evidence. So far as the case law cited before Hon'ble High Court in the case of M/s. Indian Cork Mills in that case the truck intercepted was coming out of the factory. In the instant case the department could not produce any evidence that the respondent has removed the goods clandestinely or that physically have moved out of the factory. Therefore the case law on which the department have been through out laying emphasis is not relatable to this case. Further Ld. Commissioner (Appeals) in his finding recorded that:-
There is not a single case where department has proved that lot number have not been allotted or same lot number has been allotted to two different lots. It is observed that in Textile industries lot numbers to each consignment received for processing is compulsory and various trade notices and departmental instructions are issued for the same and assessee should mention lot Nos. on each and every GP 1/invoices for its comparison with respective entries in lot register. In the instant case it is observed that preventive officers have not pointed out any such malafide non-accountal which proves the malafide of the assessee company. Hence, I fully agree with the Additional Commissioners findings that in the absence of proof of malafide of the offender, the offence can be taken only as a technical error. In such cases, entire stock of finished as well as fabrics lying in process has to be taken and then it should be compared with accounting of the said goods in Form IV register (raw material account register) and RG1 register (finished goods register) with the help of lot register and EB 4 register and then preventive party should conclude how much goods are in excess neither accounted in Form IV Register nor in finished goods account and it is kept with malafide intention to evade duty. In this case no such process has been carried out. Preventive party has simply jumped to the conclusion that non-accounted goods in RG 1 register are kept with malafide intention without proving that how they have come to the said conclusion.
7. From the above findings and the fact that the department could not give any evidence that the goods were being clandestinely removed or there was any attempt to remove the goods clandestinely the onus cannot be shifted to the respondent for proving against the case made against them. The Tribunal (supra) relied by the Ld. counsel held that in the case of CCE vs. Continental Chemicals:-
It is not possible to agree that this clause takes into its scope goods which are physically present but details of which are not entered in the accounts maintained by the manufacturer. The phrase accounting for is not synonymous with the phrase entered in the account. Accounting for anything means being answerable for or explaining a particular course of conduct. A person thus may be asked to account for his failure to do a particular act that he was required to do. In the context of the rule, it is clear that the expression is used in such a manner as to cast a burden on the manufacturer or other person concerned to show the existence of the goods that he has manufactured or received, or to offer a valid explanation for their absence. Acceptance of the meaning attributed to it by the Commissioner would then necessarily lead to the conclusion that there are two provisions in the rules for dealing with the same contravention, Rule 173Q and Rule 226. The latter rule provides for confiscation of goods that are not entered in the account to be maintained by a manufacturer. It is this rule that in fact should have been applied and had it been cited in the show-cause notice, I would have upheld the confiscation. However, the show-cause notice does not propose confiscation under Rule 226. It does not even cite it. In these circumstances, I am unable to interfere with the order of the Commissioner (Appeals).
8. In view of the above discussion, I do not find any reason to interfere with the concurrent findings of the lower authorities. Appeal of the department is dismissed as devoid of merits.
(Dictated in Court) (S.K. Gaule) Member (Technical) SR 8