Customs, Excise and Gold Tribunal - Mumbai
Sayaji Iron And Engg. Co. Pvt. Ltd. vs Collector Of C. Ex. on 22 June, 1989
Equivalent citations: 1990(45)ELT104(TRI-MUMBAI)
ORDER P.K. Desai, Member (J)
1. This appeal is directed against the Order- in-Original bearing No. 9/MP/84 [File No. V(68)15-3-OA/82], dated 24-11-1984 directing the appellants to pay appropriate duty on 4 machines totally valued at Rs. 1,75,380/- alleged to have been illegally removed and imposition of personal penalty of Rs. 1500/-. The duty amount has since been quantified at Rs. 14,030.40.
2. On 16-4-1982, the officers of the Central Excise Preventive Wing paid a surprise visit at the factory premises of the appellants and on verification of the actual stock as well as the registers maintained by the appellants, found that there was a shortage of one machine each in the category of Sayaji concrete mixture machine size 10 x 7, Sayaji concrete mixture machine size 14 x 10, Jaw crusher machine and Rotary Screen machine. The officers recorded the statement of the factory manager Mr. JR Dave on the same day who agreed to the discrepancy and shortage of each of those machines and submitted that there was a possibility of mistake in accounting and making entry in RG1 register and submitted that they would verify the registers and submit their explanation. The appellants vide their letter dated 11-5-1982 submitted their explanation as under :
3. Regarding concrete mixture 10 x 7, they submitted that there were some errors in making entry in the RG1 register and submitted that on 25-4-1981, there was short accounting in RG1 register of 3 machines Nos. 7661 to 7663 covered by Production Report No. 681, dated 25-4-1981. Further on 25-12-1981, there was a totalling mistake of 2 machines in that, instead of the correct total of 21, the incorrect figure of 23 has been shown in Col. 4 of the RG1 register which eventually led to excess accounting of 2 machines in RG1 register. They further submitted that on the same day that is, on 25- 12-1981, two machines bearing serial No. 7602 to 7603 which were already accounted for as receipt in RG1 register on 8-11-1981 were again entered as receipt, which led to excess accounting of 2 machines on this account. They submitted that thus there was an overall short accounting of three machines on 25-4-1981 and an excess accounting of 4 machines on 25-12-1981 in RG1 register and net effect thereof was that one machine was shown as surplus in the RG1 register, though it did not exist in the stock.
4. So far as the concrete mixture 14 x 10 is concerned, they submitted the explanation that one machine bearing serial No. 107 was through error, twice accounted for as receipt in RG1 register once on 5-12-1981 vide Production Report No. 271, dated 5-12-1981 and again on 23-12-1981 vide P.R. No. 365, dated 23-12-1981. Thus there was an excess accounting in the RG1 register whereas actually no such machine was ever produced.
5. For Jaw crusher machine, their explanation was that there was an excess accounting of 1 machine in RG1 register as one machine serial No. 153 was twice accounted for as receipt in RG1 register once on 12-9-1978 vide P.R. No. 415, dated 12-9-1978 and again on 23-3-1979 vide Production Report No. 240, dated 23-3-1979.
6. So far as the Rotary Screen Machine is concerned, the explanation given was that one Rotary Screen Machine bearing serial No. 325 was entered in RG1 register on 3-10-1980 vide production report No. 89. This rotary screen machine was attached to the crushing plant bearing serial No. 160 and the whole crushing plant with rotary screen machine was entered as receipt in RG1 register in the relevant section on 5-11-1980 vide production report No. 184. Thus the same rotary screen machine which was entered as the rotary screen machine in RG1 Register came to be re-entered as rotary screen machine attached to crushing plant, without any corresponding debit entry made in RG1 register showing it as removed and fixed in crushing plant.
7. Being not satisfied with the explanation submitted by the appellants, a show cause notice was issued by the department calling upon them to explain why action should not be taken against them for contravention of the provision of Rule 173G(4) read with Rules 53, 226, 52, 173F, 173G(I) and Rule 9 of the Central Excise Rules, 1944 and why they should not be directed to pay the excise duty for those machines alleged to have been illicitly removed and why personal penalty should not be imposed. The appellants in reply to the show cause notice re-iterated the stand taken by them in their letter dated 11-5-1982. They were given personal hearing. The Additional Collector however vide his impugned order disbelieved the explanation given. As regards the concrete mixture machine 10 x 7, the Additional Collector, while rejecting the same, held that if the explanation was accepted, there would be nil balance on 3-2-1982, 5-2-1982 and 9-2-1982, whereas the record showed that there were clearances on these days. The explanation therefore led to absurdity. He also held that during the budget period, the appellants were required to file declaration after physical verification which they had done and there was no discrepancy in the stock noticed. As regards concrete mixture machine 14 x 10, the Additional Collector rejected the explanation of the appellants. He held that if the explanation was accepted, there would be nil balance on many days during January 1982 and February 1982, which could have been noticed by the party, particularly during the budget period when they had filed the declaration and the same had been verified by the Supdt. Regarding Jaw crusher, the Additional Collector held that the explanation appeared baseless, as it was evident from the fact that all the machines manufactured up to 13-12-1978 were already cleared and there was no balance on 13-12- 1978 to 19-12-1978, which indicated that machine No. 153 was also cleared and that therefore there was no chance for double accounting. As regards rotary screen machine, the Additional Collector held that there appeared some discrepancy about the size of rotary machines manufactured and shown in the RG1 register and the one fitted in the crushing plant. He therefore came to the conclusion that those excess machines were manufactured and were illegally removed without payment of duty. Therefore, directed the appellants to pay duty amount and also imposed a personal penalty as mentioned above.
8. During the hearing of this appeal Shri Willington Christian, the learned advocate, on behalf of the appellants, took me through the explanations given for each of the four machines. He submitted that as per the prevaling practice, entries in RG1 register are made on the basis of certificate-cum-production report and that because of the error/inefficiency of some of the persons, there has been either double entry or not making the debit entry, which has resulted into the discrepancy. He submitted that there was no manufacture, as would be seen from the records maintained, of any machine and there was no question of any clandestine removal thereof. He also submitted that the explanation given by the party were based on the documentary evidence, the original of which was already seized right on the day when surprise visit was made and that there was no possibility of any subsequent manipulation. He submitted that the evidence produced is absolutely probable and plausible and that the appellants were not required to prove their defence beyond reasonable doubt. He submitted that probable and plausible evidence ought to have been accepted. In support of his contention Shri Willington Christian cited before me a decision of the Bombay High Court in Dhirajlal Amritlal Mehta v. Union of India reported in 1982 (10) E.L.T. 273 (Bom.). He also submitted that the Additional Collector has rejected his explanation and has held clandestine removal only on some surmises and not based on any factual data available before him. He submitted that if there was a clandestine removal, the department ought to have proved it by adducing some cogent evidence. In absence of any evidence on the part of the department to show that the explanation submitted by the appellants was not probable, no duty could be demanded nor the penalty imposed. In support of his contention, he relied upon the decision of the Supreme Court in the case of Amba Lal v. Union of India and Ors. reported in 1983 (13) E.L.T. 1321 (SC) and also the decision of the Madras High Court in the case of B. Lakshmichand v. Government of India reported in 1983 (12) E.L.T. 322 (Mad.), the decision of the Kerala High Court in the case of M. Koyakutty, Kayamkulam v. Collector of Customs and Central Excise, Cochin and Ors. reported in 1978 (2) E.L.T. (J 494) and the judgment of the Calcutta High court in the case of Harchand v. Additional Collector of Customs, Calcutta and Ors. reported in 1981 (8) E.L.T. 699 (Cal). He also cited the judgment of the CEGAT, North Regional Bench, reported in 1983 ECR 1727D (CEGAT) and submitted that mere suspicion cannot take the place of circumstancial evidence.
9. He also submitted that the order of the Additional Collector is therefore bad in law and it is required to be set aside.
10. He submitted that there is no malafide on the part of the appellants. The only thing was that because of the inefficiency of the staff members, there had been improper maintenance of RG1 register which does not call for any imposition of penalty.
11. Heard Shri K.M. Mondal, the learned SDR, on behalf of the department. He, however, supported the order of the Additional Collector and submitted that the Additional Collector has considered the explanations and on due scrutiny thereof by examining the relevant records, has rightly come to the conclusion that there were discrepancies which could not be explained. If the explanation submitted by the appellants was accepted, that led to absurdity. He re-iterated the same grounds which have been taken by the Additional Collector to negative the explanation submitted by the appellants. Shri Mondal further submitted that notwithstanding anything, the fact remains that the RG1 register has not been properly maintained. Under the law maintenance of the prescribed register properly, is a mandatory provision and breach thereof, itself renders the appellants liable to penalty and that the penalty imposed therefore, is just and proper.
12. In reply Shri Wellington Christian, the learned Advocate, drew my attention to Section 14(3) of the Central Excises and Salt Act and submitted that this is an enquiry in the nature of judicial proceedings and therefore the Additional Collector ought to have appreciated the evidence not an executor but a judicial authority.
13. Considering the submissions made, so far as concrete mixture 10 x 7 is concerned, three different errors in RG1 register, have been pointed out - (a) 3 machines produced on 25-4-1981 vide production report No. 681, have not been entered in RG1 Register; (b) on 25-12-1981 there is a totalling mistake, where instead of '21' figure '23' is written; (c) On 25-12-1981, there has been a double entry for machines No. 7602 and 7603, vide Production Report No. 369, though the same machine were entered in RG1 register on 8-11-1981.
14. So far as errors (b) and (c) above are concerned, the error are apparent on the record. There is an obvious totalling error and so far as double entry of machines Nos. 7602, 7603, in the Production Report No. 369 itself there is a mention that entry made vide Production Report No. 212, ought to be deleted. Such deletion is however not made.
15. As regards, error dated 25-4-1981 mentioned at (a) above, the appellants have produced the production report No. 681 dated 25-4-1981 and have shown that no corresponding entry is made in RG1 register. This evidence, in itself, may not have been enough to remove the doubt regarding the genuineness of the said Production Report, but here the appellants have also produced copy of GP1 No. 1186 and 1189 dated 20-5-1981, showing that three machines No. 7661, 7662 and 7663 have been taken out of the factory under a valid Gate Pass. These very numbers appear in Production Report No. 681. The department has not brought out anything to show that these three machines were duly entered in RG1 register elsewhere.
16. This explanation is rejected by the Additional Collector, on the ground that, if explanation was accepted, there would be nil balance on 3-2-1982, 5-2-1982 and 9-2-1982, whereas the record showed that there were clearances on these days. The Additional Collector has not elaborated his reasonings. The appellants have challenged the same, by pleading that the calculation made and conclusion drawn were erroneous. When the errors pleaded are apparent on record, calling for no further investigations or detailed scrutiny of the record, and when it is absolutely clear that RG1 register is not properly maintained, if the Additional Collector wanted to have his conclusion on such a point, he ought to have given the further opportunity to the appellants to explain the anomaly that arose. When that has not been done, it is difficult to accept the reasons given by the Additional Collector for rejection of the explanation. It is also observed by the Additional Collector that during the Budget period, the appellants had filed declaration after physical verification when no discrepancy was noticed when the appellants are so much negligent even in posting entries even in RG1 register which they are statutorily required to maintain, in all probabilities, they would have filed the declaration without actual verifications. The lapse on the part of the appellants is highly deplorable and the department may be justified in taking strong action in that regards. The question here, however, is whether, on such a ground can the appellants be held to have illegally removed the machine without payment of duty. In my view, when further explanation is not called for, the reasonings given by the Additional Collector are not adequate to draw the conclusion as he had done.
17. An argument was advanced by the learned SDR, that so far as error in totalling on 25-12-1981 is concerned, it is on account of figure '8' written in the column indicating new production in that day, however, figure '8' was substituted for figure '10', initially written which was erased. A pointer was made towards some malafide attempt on the part of the appellants. In absence of any other corroborative evidence, it is not possible to impute any malafide, so as to ultimately lead to drawing up a conclusion that there was some clandestine removal. It is an established position that, the personnel in charge of the branch, had total lack of efficiency, and this can be an additional error.
18. For concrete mixture 14 x 10 also, the documentary evidence duly establishes double entry of machine Sr No. 107, once on 5-12-1981 vide Production Report No. 271 and second time on 23-12-1981 vide Production Report No. 365. The Additional Collector has rejected the explanation on the ground that, with that explanation taken as true, there would be nil balance on many days during January and February 1981. When the appellants have exposed themselves as most irresponsible and negligence in maintaining RG1 register, it is just probable, that they may not have, noticed this discrepancy also.
19. As regards Jaw Crusher Machine also, there has been a double entry for machine Sr No. 153, once on 12-9-1978 vide Production Report No. 415 and again on 23-3-1979, vide Production Report No. 240. This is clearly apparent from the records. The Additional Collector has rejected the same on the ground that all machines manufactured before 13-12-1978 were cleared out and there was no balance between 13- 12-1978 and 19-12-1978. When the explanation in the form of documentary evidence was produced by the appellants, the Additional Collector ought to have called for further clarification, if further discrepancy was noticed. This could have made the position clear, either for the appellants to prove their innocence or for the department to bring home the charges.
20. The explanation regarding Rotary Screen machine is that the machine produced was subsequently fitted in Crushing Plant, but debit entry was not made in RG1 register. The Additional Collector has rejected the same on the ground that size of Rotary Screen Machine, entered in RG1 register and of the one fitted in Crushing Plant differ. It is however not clear as to on what basis, he has drawn the said conclusion.
21. The whole discrepancy appears to be the result of erroneous method adopted by the appellants in making entry in RG1 register, on the basis of Production Report. Reading of the so called Production Report, it is nothing more than certificate of examination of the machine produced pursuant to the order received and as and when the party ordering was changed, on account of cancellation of the order or otherwise, and the machine was to be supplied to some other, then there was a fresh examination and fresh certificate issued, which again came to be entered in RG1 register.
22. In any case, the plausible explanation has been provided by the appellants regarding the discrepancies, and the department has not investigated further and proved by cogent evidence that explanations were patently improbable. In absence of any further explanation sought for from the appellants as regards nil balance on some specified dates, or variation in size, the initial explanation submitted should not have been rejected.
23. Further, there is no positive evidence to prove the clandestine removal, and the conclusion is based merely on the assumption, as in the opinion of the Additional Collector, the explanation was not worthy of credence.
24. Undisputedly, there are lots of irregularities, but merely on that count, allegation of clandestine removal cannot be levelled.
25. Under the circumstances, I hold that the charges levelled against the appellants in the notice to show cause, cannot be held as duly established.
26. It was submitted that in any case, many irregularities have been noticed in RG1 register, which is statutorily required to be maintained and the appellants deserved to be penalised on that count. The show cause notice however relates only to the allegations of clandestine removal, and hence the said plea cannot be entertained.
27. In the result, the appeal is allowed, order of the Additional Collector is set aside. Consequential relief to follow.