Customs, Excise and Gold Tribunal - Delhi
Kochar Sung-Up Acrylic Ltd. vs Cce on 19 July, 2006
Equivalent citations: 2006(111)ECC278, 2006ECR278(TRI.-DELHI), 2007(208)ELT284(TRI-DEL)
ORDER M.V. Ravindran, Member (J)
1. This appeal is directed against the order-in-appeal dated 23.03.2004 that allowed the appeal filed by the revenue against the order-in-original, that set aside the proceedings initiated against the appellant.
2. The relevant facts that arise for consideration are that the Officers of the preventive section of Central Excise visited the factory of the appellant and during the stock taking found a difference in the physical stock of finished goods. On further investigation it was noticed by the officers that the appellant had not recorded 1007 of acrylic Blankets found in excess, subsequently seized and as the appellant had not satisfactorily explained absence of 497 of Acrylic Blankets and there was shortage of inputs i.e. Acrylic Yarn. A show cause notice was issued for confiscation of the seized blankets and demand of duty on the finished goods found and inputs short. The adjudicating authority vide his order in original dated 31/7/2000 dropped the proceedings initiated against the appellant. The revenue preferred an appeal against the said order, which was set aside and demand was confirmed, confiscation was ordered and penalties imposed. The appellant is in appeal against the impugned order.
3. Learned Advocate appearing for the appellant submits that the confiscation of the finished goods found in excess than recorded is not correct as these goods were not available for confiscation. He relies for this proposition on the order of tribunal in the case of Ram Khazana Electronic . As regards the demand of duty on the 497 blankets it is his submission that these goods were in fact recorded in the RG1 but issued for removal of the stains observed during storage. He submits that these goods were subsequently cleared on payment of duty and that the double entry was due to the error of the dealing clerk. As regards the duty on the shortage of the raw material it is his submission that the impugned order has traversed beyond the show cause notice in as much that the demand was not raised on this point.
4. The learned Departmental representative on the other hand defends the impugned order by submitting that the confiscation need not only be on the availability of the seized goods but can be on the goods liable for confiscation. It is his submission that the 1007 blankets were found unrecorded were liable for confiscation and hence the confiscation was correct. As regards the shortage of 497 blankets it is his submission that these goods were shown as produced by the appellant but are not able account for the dispatches of the same on payment of duty, hence in the absence of any such evidence the duty is payable by the appellant. On the point of demand of the duty on raw material found short it is submitted that the demand was in fact worked out on the raw material only and the impugned order is not traversing beyond the show cause notice.
5. Considered the submissions made by both sides at length and perused the records. Three issues arise in this case and they are dealt with in separate paras.
5.1 The first issue is regarding the confiscation of the excess finished goods found in the factory of the appellant. I find that the adjudicating authority has dropped the proceedings and hence the finished goods those were seized on the date of the visit were released unconditionally without insisting on Bond, security etc. In the absence of any conditional release the goods cannot be confiscated, as there are no goods available on the date of impugned order for confiscation. I find force in the arguments put forth by the advocate and also find that division Bench of this Tribunal in the case of Ram Khazana Electronic v. C.C., Air Cargo, Jaipur reported at has held as under:
8. In Shiwalya Spinning & Weaving Mills (P) Ltd., this Tribunal has taken the view that when the goods are not available for confiscation, redemption fine cannot be imposed. In the facts of the above case goods were cleared on payment of duty and later it was held that the importer was liable to pay higher amount of duty. The contention raised by the importer that no redemption fine could be imposed and the goods were not available for confiscation was accepted by this Tribunal. A similar view was taken in Chinku Exports . In the above case also goods were not available for confiscation as the same having been exported many years ago. It was also observed therein that there was no bond with such security in any format available with the department which could be enforced. It was, therefore, held that the redemption fine imposed was totally outside the purview of the legal provisions. Same was the view taken in Prudential Pharmaceuticals Ltd. 2001 (136) E.L.T. 1057 and Universal Steel Agencies v. CC, Kandla 2001 (138) E.L.T. 360 (T).
9. We now consider whether the ratio of the above decisions of the Tribunal is against what has been held by the Supreme Court in Weston Components Ltd. The order of the Apex Court reads as follows:
Order - It is contended by the learned Counsel for the appellant that redemption fine could not be imposed because the goods were no longer in the custody of the respondent-authority. It is an admitted fact that the goods were released to the appellant on an application made by it and on the appellant executing a bond. Under these circumstances if subsequently it is found that the import was not valid or that there was any other irregularity which would entitle the customs authorities to confiscate the said goods, then the mere fact that the goods were released on the bond being executed, would not take away the power of the customs authorities to levy redemption fine.
2. The appeal is dismissed.
10. A reading of the above order would show that the Apex Court has taken the view that redemption fine can be imposed even in the absence of the goods as the goods were released to the appellant on an application made by it and on the appellant executing a bond. Since the goods were released on a bond the position is as if the goods were available. The ratio of the above decision cannot be understood that in all cases the goods were permitted to be cleared initially and later proceedings were taken for under-valuation or other irregularity, even then redemption fine could be imposed. We are, therefore, inclined to accept the contention raised by the appellant on this issue and set aside the redemption fine.
It can be seen that ratio of the tribunal decision squarely applies in the case before me. Accordingly, respectfully following the order in the case of Ram Khazana Electronic (supra), the impugned order confiscating 1007 nos of blankets is liable to be set aside and I do so and allow the appeal of the appellant on this issue.
5.2 As regards the confirmation of the duty on 497 nos of blankets I find that the officers on the day of visit found a production slip indicating the production of the day. The said production slip indicated 1504 nos of the blankets being transferred to warehouse. This fact remains undisputed by the appellants. The appellants are not able to show from the records whether they had factually removed these 497 nos of blankets on payment of duty. The submission of the advocate that these blankets were issued for cleaning the stains from the stock already recorded is also not substantiated by any evidence, even before me. If it is the appellant's case that these goods were in fact removed from the warehouse, they should have been able show the entries made in the records, which the are unable to do so. Since the production of the 1504 nos of blankets is undisputed till date and out of these 1007 nos of blankets were found un-accounted in the appellant's factory, adverse inference can be drawn in respect of 497 blankets (which is the difference between the production slip figure and physical sock) and they are to be presumed as being removed without payment of appropriate duty. I have no hesitation in holding that the appellant has not discharged the burden of proof of payment of the duty on the clearances on 497 nos of blankets and the demand of duty confirmed on this issue is upheld. The impugned order to that extent is upheld and the appellant's appeal stands rejected on this count.
5.3 As regards the confirmation of the duty on the short found raw materials I find that the show cause notice allegedly demanded the duty of Rs. 60,456/- by working out the number of blankets that could have been manufactured by the appellants from the short found raw material and cleared clandestinely. The relevant portion of the show cause notice is read:
Central Excise duty of Rs. 52,125/- leviable on 497 pcs of Acrylic Mink Blankets valued at Rs. 6,51,567/- clandestinely removed from the factory and Rs. 52,570/- BED + Rs. 7,886/- AED = Rs. 60,456/- leviabale on the Acrylic Mink Blankets manufactured out of 2,350/- kgs. Acrylic Yarn found short and thus, clandestinely removed from the factory without entering into Central Excise records, should not be recovered from them under Rule 9(2) of the Central Excise Rules, 1944 read with Section 11A(1) of the Central Excise Act, 1944.
It can be seen that the demand on this issue from the appellant is in the form of duty that is payable on the finished goods that could have been manufactured by the appellant. The demand of the duty is totally on the presumptive ground. Hon'ble Supreme Court in the case of Oudh Sugar Mills case [1978 (2) ELT J172] has held as under:
Show cause notice - Based on assumption and presumption - Show cause notice issued on the basis of average production, no evidence for removal of goods without payment of duty - human element plays a significant part in the process of manufacture - average production cannot be made basis for issue of show cause notice- the findings based on such show cause notice are without any tangible evidence and are based only on inferences involving unwarranted assumptions and are vitiated by an error of law.
6. The ratio of the apex court's judgment in the case of Oudh Sugar Mills case squarely covers this issue. Accordingly, respectfully following the said judgment the impugned order confirming the demand of duty on this ground is liable to be set aside and I do so. The appeal of the appellant on this issue succeeds.
7. As regards penalty on the appellant I find that the penalties imposed on the issues held in favour of appellant gets automatically vacated in as much that, it is settled law that if there is no confiscation and demand of duty, there cannot be any penalty. As the appellants are unable to show the discharge of duty liability on 497 nos of blankets, they have made themselves liable for imposition of penalty. Accordingly, to my mind penalty imposed on the appellant on this count is correct and does not require any interference. Penalty on this count is upheld.
8. Accordingly, the appeal of the appellant is allowed partly as indicated in the above paragraphs.
(Order pronounced on 19/7/06)