Custom, Excise & Service Tax Tribunal
Cce, Delhi vs (2) Shri Manoj Kumar Jain on 10 January, 2014
CUSTOMS, EXCISE & SERVICE TAX
APPELLATE TRIBUNAL,
West Block No. 2, R.K. Puram, NEW DELHI
COURT No. III
Excise Appeal No.1388-1389 of 2006
Date of Hearing : 01.03.2012.
[Arising out of Order-In-Appeal No.172/DK/ST/JPR-I/2010, dated 20.04.2010 issued by CCE, Jaipur]
For approval and signature:
Honble Ms. Archana Wadhwa, Judicial Member
Honble Mr. Mathew John, Technical Member
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?
CCE, Delhi Appellants
Versus
(1) Ganpati Rolling P.Ltd.
(2) Shri Manoj Kumar Jain Respondent
Coram:
Honble Ms. Archana Wadhwa, Judicial Member Honble Mr. Mathew John, Technical Member Present for the Appellant - Shri Bharat Bhushan, AR Present for Respondent - Shri K.K.Anand, Adv.
Misc Order No. 718/2012-Ex(BR) Final Order No. 50562-50563/2014 Per Ms. Archana Wadhwa:
Being aggrieved with the order passed by Commissioner (Appeals), Revenue has filed the present appeal. We have heard Shri Bharat Bhushan, ld. AR appearing for the Revenue and Shri K.K.Anand, ld. Advocate appearing for the respondents.
2. M/s Ganpati Rolling P.Ltd. are engaged in the manufacture of copper wire rods falling under Chapter 7408 of the Central Excise Tariff Act, 1985. Shri Manoj Kumar Jain is Director of the said manufacturing unit.
3. The premises of M/s Ganpati Rolling P.Ltd. were put to search by the officers of DGCEI on 22.02.04. On verification of the stock, it was found that the raw materials and the finished goods were in excess of the quantity recorded in the statutory records. The same were accordingly put under seizure by way of a Panchnama dtd. 22.02.04.
4. Statement of Shri Lalji Dubey, Manager was recorded on the same date wherein he deposed that the records maintained by them in the shape of raw materials stocks register, PLA Cenvat register are not available in the factory. The respondent produced the said records subsequently for the provisional release of the goods after completing the records. Statement of the respondents accountant Shri Raghunandan Aggarwal was recorded wherein he deposed that he is a part-time accountant of the unit and does not write the books of accounts regularly. The same are completed as and when he visits the factory. He accepted that the entries in RG-1 register were made subsequent to the seizure. Statement of Shri Manoj Kumar Jain, Director of the manufacturing unit was also recorded accepting the fact that it is Shri Lalji Dubey who is Manager and authorised signatory and looks after day-to-day activities.
5. On the above facts, proceedings were initiated against the respondent by way of issuance of Show Cause Notice dtd. 18.08.04 proposing confiscation of the seized goods, excess found raw material as also excess found goods totally valued at Rs.93 lakhs approximately and proposing imposition of penalties on the manufacturing unit as also on the Director. The said SCN culminated into an order passed by Joint Commissioner confiscating the goods with an option to the respondent to redeem the same on payment of redemption fine of Rs.25 lakhs. In addition, he also imposed penalty under Rule 25 of Central Excise Rules, 2002 and Rs.25,000/- on Shri Manoj Kumar Jain, Director.
6. The said order was appealed against by the respondents before Commissioner(Appeals) who by taking note of various decisions of the Tribunal as also of the provisions of Rule 25, set aside the confiscation of goods and imposition of penalty on the ground that there is no mensrea on the pat of the respondent and mere non-entry in RG-1 register cannot be adopted as a ground for confiscation and penalty.
Hence, the present appeal by the Revenue.
7. After appreciating the submissions made by both sides and after going through the impugned order, we find that there is no dispute on the factual position. Admittedly the raw material as also the finished product was found to be in excess, as not recorded in the statutory documents.
As regards, the raw material, the appellate authority has relied upon various precedent decisions of the Tribunal holding that requirement of accountal of goods under Rule 25 of Central Excise Rules applies to the final excisable goods and the raw material is not liable to confiscation on the ground of non-entry in the statutory records. The appellate authority relied upon the Tribunals decision in the case of Oceanic Cooling Towers P.Ltd. reported in 2003(161)ELT631(Tri.) as also in the case of Saboo Berlac Ltd. reported in 2004(177)ELT1114(Tri.). To the similar effect is the decision of the Tribunal in the case of Dincotex P.Ltd. reported 1999(107)ELT326(Tri.).
By following the said decisions, he set aside the confiscation of raw material. We find that the law on the above issue stands settled by various decisions, some of which stands referred to and relied upon in the impugned order of Commissioner (Appeals). Revenue has referred to the Tribunals decision in the case of Patel Products reported in 2003(151)ELT650(Tri.-Del.) wherein duty demand on the raw material found short was upheld against the assessee. We find that the ratio of the above decision is not applicable to the facts of the present case in as much as no duty stands confirmed against the respondents on the case of short found raw material. In fact the allegations are that the raw material was not entered in the statutory records and as such was in excess than the balance reflected in the statutory records.
As such we find no justifiable reasons for confiscation of seized excess found raw material.
8. As regards, the confiscation of the excess found final product, we find that Commissioner(Appeals) has referred to the provisions of Rule 25. Sub-rule (v) of Rule 25 provides for confiscation of the goods if the manufacturer does not account for the excisable goods produced or manufactured or stored by him. The appellate authority by relying upon the Tribunals decision in the case of Pepsi Foods reported in 2002(139)ELT658(Tri.) has held that accounting for goods is different than non-recording in RG 1 register. Erstwhile Rule 173Q means explaining correct position of excisable goods as per law and non-accountal would relate to not making correct entries in accounts books. By observing that there is no finding of any mensrea against the assessee so as to invoke sub-rule (d) of Rule 25 which relates to contravention of any of the provisions with an intent to evade payment of duty, he has held that confiscation of the excess found goods was also not called for. Ld. Appellate authority has also relied upon Larger Benchs decision in the case of Bhilai Conductors P.Ltd. reported in 2000(125)ELT781(Tri.-LB) laying down that mere non-accountal of goods in RG-1 register, when there is no evidence that non-accountal was meant for removal from the factory without payment of duty, cannot be the made basis for confiscation of the goods. The appellate authority also observed that Rule 173(Q) being a penal provision, intention is in-built in it and hence mensrea is essential ingredient to attract this clause which has to be read with conjunction and not in isolation with the other sub-rules of the said provisions. Accordingly, Commissioner(Appeals) has held that mere non-presence of records/non-entry is not sufficient to constitute a reasonable belief that the goods were meant for clandestine removal without payment of duty in the absence of any evidence to the contrary.
9. We note that the statutory records were not available in the factory premises at the time of visit of the officers. The same were produced on the next day after making the entries. As such the question required to be decided is as to whether such non-entry in RG 1 will attract their confiscation or not?
10. As rightly contested by ld. Advocate for the respondents, confiscation is attracted in terms of Rule 25(b) or (d). Rule 25(b) covers a situation where a manufacturer does not account for the excisable goods manufactured by him. The question is as to how the said expression does not account for has to be interpreted. Mere non-entry in RG 1 records will suffice for holding that the goods have not been accounted for by the manufacturer. After all such huge production requires equally huge consumption of raw materials. There would be production slips or other documentary evidences at the intermediate stage. There is nothing on record to show that the said raw material, out of which final products stands manufactured by the respondent, were not reflected in the records neither is there any allegation to that effect. If the same were reflected in the raw material records, it cannot be held that the finally manufactured goods were not accounted for by the respondent. If the said goods are part of the regularly manufactured goods by the respondents, the mere fact of their non-entry in RG 1 would not call for their confiscation. The Tribunals decision in the case of Bhilai Conductors P.Ltd. referred (supra) makes it very clear that there need to be a malafide intention on the part of the manufacturer to clear the goods clandestinely. Such malafide intention has to be arrived at from the evidences collected by the Revenue. The mere fact of non-entry which can be on account of so many reasons, cannot be said to be an evidence reflecting upon the malafide intention of the assessee. No doubt the records are required to be maintained upto date and in the present case, the accountant of the manufacturing unit has clarified that he was not attending the factory regularly and was not making entries in the records regularly. However, such fact by itself, i.e., making of delayed entries in RG 1 register, cannot be adopted as ground for confiscation of goods or imposition of penalties on respondents.
11. In view of our fore going discussions, we find no justifiable reasons for interfering in the impugned orders. Revenues appeal is accordingly, rejected.
(Pronounced in the open court on ____________) (Archana Wadhwa) Judicial Member (Mathew John) Technical Member RK-I
12. I have gone through the case records, considered the pleadings during hearing and the order recorded by Member (Judicial). Since I consider that the decision recorded by Member (Judicial) involves serious questions of law with common applicability and since I am not able to agree with the legal position as expounded by Member (Judicial) I am writing this separate order.
13. The outcomes of the decision recorded by Member (Judicial), as I understand it, are the following:
(i) A manufacturer of excisable goods need to maintain records showing the excisable raw material received and excisable products manufactured only if he chooses and even if he chooses to maintain record, he need to keep the records in the factory premises only if he further chooses to do so. If he does not choose to do both or the former only, no penal consequences will follow so long as Revenue is not able to collect evidence of clandestine removal.
(ii) Even if manufacturer choses to maintain accounts that too in his factory but if excisable raw materials are not entered in his books no penal consequence can visit him.
(iii) In the event of raw materials or finished goods not entered in books of accounts there can be no penal consequence unless intention to evade excise duty is proved by Revenue.
14. A corollary of the above conclusion is that no penal consequence can arise if a person undertakes manufacturing activity without registration under Rule 9 of Central Excise Rules unless of course revenue is able to seize goods cleared without payment of duty and also prove the intention to evade payment of duty. This is being explained later. These are radical results with serious consequences. So it may be proper to consider these conclusions in the context of the relevant rules and facts of this case.
15. Let us first consider Rule 10 of the Central Excise Rules which reads as under:
Rule 10. Daily stock account. (1) Every assessee shall maintain proper records, on a daily basis, in a legible manner indicating the particulars regarding description of the goods produced or manufactured, opening balance, quantity produced or manufactured, inventory of goods, quantity removed, assessable value, the amount of duty payable and particulars regarding amount of duty actually paid. (2) The first page and the last page of each such account book shall be duly authenticated by the producer or the manufacturer or his authorized agent.
(3) All such records shall be preserved for a period of five years immediately after the financial year to which such record pertain.
16. This Rule is explicit enough to state that daily stock account need to be maintained on daily basis and not when a person engaged for writing the account pleases to do so. The register maintained for accounting the finished product is traditionally know as RG-1, though the statutory support for the form and name of the Register is discontinued. In this case such registers were not available in the factory and hence there is a clear contravention of rule 10 as above.
17. The next Rule to be considered is Rule 25 which reads as under:
RULE 25 confiscation and penalty- (1) subject to the provisions of section 11AC of the Act, if any producer, manufacturer, registered person of a warehouse or a registered dealer-
(a) removes any excisable goods in contravention of any of the provisions of these rules or the notifications issued under these rules; or
(b) does not account for any excisable goods produced or manufactured or stored by him; or
(c) engages in the manufacture, production or storage of any excisable goods without having applied for the registration certificate required under section 6 of the Act; or
(d) contravenes any of the provisions of these rules or the notifications issued under these rules with intent to evade payment of duty, then, all such goods shall be liable to confiscation and the producer or manufacturer or registered person of the warehouse or a registered dealer, as the case may be, shall be liable to a penalty not exceeding the duty on the excisable goods in respect of which any contravention of the nature referred to in clause (a) or clause (b) or clause (c) or clause (d) has been committed, or [rupee two thousand], whichever is greater (2) An order under sub-rule (1) shall be issued by the Central Excise Officer, following the principles of natural justice.
18. The conclusions in para 13 above seem to result from a few decisions of Tribunal in the past. The logical sequence of the arguments in this context is as follows:
(i) The expression with intent to evade payment of duty is specifically incorporated in clause (d). Though the other clauses do not have this expression, it is held by Tribunal that since clause (b) prescribes penalty and since penalty cannot be imposed without mensrea, the words with intention to evade payment of duty should be read into clause (b). Para 32 of the decision in Bhilai Conductors Pvt. Ltd. 2000 (125) ELT 781 (Tri) may be seen. This reasoning is equally applicable to clauses (a) and (c) of Rule 25 also.
(ii) The expression account for is different from recording in accounts. Para 10 of the decision in the case of Pepsi Foods Vs. CCE-2002 (139) ELT 658 (Tri.-Del.) may be seen.
(iii) The expression excisable goods used in clause (c) will not cover goods on which excise duty has been paid. So it will not apply to raw materials.-See para 5 of Saboo Berlac Ltd.-2004 (177) ELT 1114 (Tri)
19. Reasons why conclusion at para 18 (i) above is not correct.
19.1 The proposition at para 18 (i) above does not appear to be correct because the Apex Court has recognized the principle of statutory penalty in the case of UOI Vs. Dharmendra Textiles-2008 (231) ELT 3 (S.C.) wherein the Court held that where the statute prescribes a penalty without reference to intention to evade duty such penalty is to be imposed without regard to mensrea. So the argument that for imposing any penalty, mensrea has to be first proved is not correct. In the light of this decision there is no reason to presume that the expression intent to evade payment of duty used in clause (d) is applicable to other clauses also. Such reading would imply that the requirement under Rule 9 of the Central Excise Rules that a manufacturer of excisable goods should register with Central Excise department also is rendered as having no conswqunce since the reasoning above should apply to clause (c) also.
19.2 In the case of acts specified in clauses (a) to (c) the acts are essentially of a nature which results in avoiding payment of duty. Hence these clauses are without reference to intention to evade payment of duty. The situation specified in clause (d) is more general in nature and deals with contraventions of any provisions of any provisions. Such contraventions those are classified into two. If the act is with intention to evade payment of duty provisions of Rule 25 (d) will apply. If it is without intention to evade payment of duty Rule 27 which prescribes penalty not exceeding Rs. 5000/- is prescribed. Other type of contraventions of Rules, a penalty which does not exceed Rs. 5000/- is prescribed under Rule 27. Intention to evade is not relevant for imposing penalty under Rule 27 either. Dispute about penalties under this rule does no t normally come up for decision before Tribunal or Courts because t6he penalty amount is very small.
19.3 The conclusion at para 18 (i) above is to the effect that clause (b) and (c) is really superfluous and only clause (a) of Rule 25 survives that too subject to the condition that removal has taken place and Revenue proves that the removal was with intent to evade payment of duty. While interpreting statutes interpretation that renders any clause or words superfluous is to be avoided. So I am of the view that the proposition is erroneous.
20. Reason why conclusion at par 18 (ii) is not correct.
Prima facie the expression account for has to be understood differently from recording in RG-1. But what is to be noted is that if goods are not entered in account books there will be no goods to be accounted for. In my view presence of goods not entered in registers have to be accounted for, that is, reasons for the presence of the goods have to be explained. Sometimes it is explainable. In the case of Pepsi Foods (supra) the situation was that the goods were accounted in records showing receipt of raw material and records for goods in process but the goods were yet to be entered in the register for recording finally manufactured goods. Here we may recall that there is long standing issue as to what is the stage at which goods have to be entered in the register envisaged in Rule 10 commonly called as RG-1. Quite often the argument comes up that the goods in question were not fully finished. Mostly the argument is accepted. But that can be only in situations where the goods are otherwise accounted for by the party, that is the presence of the goods are evident from entries in other registers and non-accounting is either due to a simple error or due to difference in understanding as to when the goods becomes finished goods. But if the presence of the goods is not entered in any records maintained in the usual course of business, the goods are clearly liable to confiscation under Rule 25 (b). That is the reason why the expression with intent to evade payment of duty is not included in this clause. So cases where the goods are not entered in registers are to be judicially examined to see whether the omission to enter it in one of the registers is explainable. The reason given in this case that the persons writing account comes only once in a while and he writes account as and when he comes is not an explanation that can be accepted in this context. In my view, in this case the explanation given for such non-recording is not acceptable to satisfactorily account for the goods.
21. Reason why the conclusion at para 18(iii) is not correct 21.1 The definition of excisable goods as per section 2 (d) reads as under:
(d) excisable goods means goods specified in the First Schedule and the Second Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) as being subject to a duty of excise and includes salt; 21.2 In the above definition there is no exclusion for goods on which duty is paid. To this extent this definition is different from the definition of dutiable goods in Customs Act. In my view the above definition includes raw materials which are excisable even if duty thereon is paid. If credit of such duty is paid the provision is applicable with a higher force. Clause (b) requires accounting of excisable goods stored. In my view this word will apply to raw materials also so long as those are excisable goods. The process of accounting for starts with recording in registers and hence recording in registers is included in the expression account for.
21.3 So I am of the view that the conclusion at para 18 (iii) is not consistent with decisions of higher courts and hence erroneous.
22. In this context there is another common erroneous approach in interpretation of the expression subject to provisions of section 11AC used in Rule 25. One interpretation canvassed is that the words fraud, collusion, willful misstatement or suppression of facts used in section 11AC should be imported into Rule 25 from section 11AC. Another interpretation is that if in the facts of a case section 11AC is applicable that shall apply to the exclusion of Rule 25 and in other situations rule 25 will apply. I am of the view that the latter interpretation is correct and not the former.
23. By a synthesis of various decisions as dealt with by Member (Judicial), the very mechanism prescribed under the Rules as a help to detect evasion of duty is set to naught. In the process the principle that to prove a murder case the dead body should be produced, is extended, with suitable modification, to matters relating to clandestine manufacture and clearance of excisable goods. The following three would suffice to understand the reasoning given by Member (Judicial).
(i) Bhilai Steel Conductors Pvt. Ltd. Vs. CCE-2000 (125) ELT 781;
(ii) Saboo Berlac Ltd. Vs. CCE-2204 (177) ELT 1114
(iii) Pepsi Foods Vs. CCE-2002 (139) ELT 658 (Tri.)
24. There are decisions of higher Courts contrary to the above argument. The following decisions may be seen.
(i) S.K. Packs (P) Ltd. Vs. CCE-2012 (276) ELT 186 (P&H);
(ii) CCE Vs Rajhans Silk Mills-2011 (268) ELT 327;
25. I note that the decision of the Tribunal in Bhilai Conductors P. Ltd. reported in 2000 (125) ELT 781 was strictly not a decision of the Larger Bench as observed by Member (Judicial) but a decision of majority of the Members arising due to difference in view between two Members who originally heard the matter. I also note that the High Court of Punjab and Haryana has called for reference on questions of law involved in the case of Pepsi Foods Vs. CCE-2002 (139) ELT 658 (Tri. Del.) relied upon by Member (Judicial).
26. I am of the view that the argument given in para 7 of the order of the Member (Judicial) for distinguishing the decision in the case of Patel Products also need to be seen in a slightly different perspective. It is true that in this case there is no demand of duty on raw materials found in excess. In fact such demand cannot be made in the hands of the appellant so long as they have not taken Cenvat credit and removed it without reversing the credit taken. But when both raw materials and finished goods are seen not recorded in accounts the intention for clandestine activity is obvious. Intention of a party is not something which can be seized and produced in a court. It is something to be inferred from the facts having regard to legal provisions. When goods are seized and released within the factory there is a liability to account the goods so seized and account goods manufactured from such material and clear it on payment of duty.
27. In my view the arguments recorded by Member (Judicial) converts excise levy into a scheme of voluntary payment rather than voluntary compliance supported by legal provisions to enforce levy if not complied voluntarily. If that is the true position it helps everybody concerned to have the conclusions recorded by me in para 13 in a consolidated manner rather than have it as legal position scattered in many decisions known only to a select few because law should be known to everybody and should apply to all equally not just to a party who litigates. This purpose will be best achieved only if rules are notified consolidated the legal interpretations. Second best thing that can happen is to consolidate the position in one judgment of the Tribunal. That is the reason why I have recorded it, though I am not able to agree with the conclusions.
28. To sum up this is a case where the appellant did not record the raw materials and finished goods in his factory as was detected on 22-02-2004. Such non-recording is not satisfactorily accounted for. So the goods are liable to confiscation under Rule 25 (b) of Central Excise Rules. There are decisions of the Tribunal which may marginally, conflict with this conclusion. But there are decisions of the Apex court and High Courts, as already explained, which decisions are contrary to the decisions of the tribunal. That being the case it is not necessary to refer the matter to a Larger Bench of the tribunal while taking the decision as proposed by me.
29. However I am of the view that the redemption fine and penalty should be imposed having regard to the quantum of duty that could be evaded through the process of not recording the goods in the books of accounts. In this case the redemption fine and penalties are excessive by this criterion. So I propose to restore the redemption fie to Rs. 15,00,000/- and fine on the main appellant to Rs. 3,50,000/- and that on the Director to Rs. 1,50,000/- and allow the appeal of the Revenue to that extent only.
Mathew John (Member-Technical)
29. POINTS OF DIFFERENCE OF OPINION Whether in the facts of the case and the law applicable including the various decisions of judicial forums discussed, the seized goods are not liable to confiscation and the assessee company and the Director not liable to penalties as held by Member (Judicial) OR Whether in the facts of the case and the law applicable including the various decisions of judicial forums discussed, the seized goods are liable to confiscation and the assessee company and its Director are liable to penalties as held by Member (Technical).
(Pronounced on 18.06.2012) (Archana Wadhwa) (Member-Judicial) (Mathew John) Member (Technical)
30. The Registry may place the matter before the President, CESTAT for resolving the above points of difference in views of the two Members.
(Archana Wadhwa) (Member-Judicial) (Mathew John) Member (Technical) Per D N PANDA
30. While adjudication was made finding physical existence of unaccounted excisable goods weighing 78973.32 Kgs, not supported by any evidence relating to lawful possession thereof by the respondent company, calling for seizure and confiscation thereof, followed by imposition of redemption fine of Rs. 25,00,000/- and penalty of Rs. 25,00,000/- on M/s Ganapati Roling Pvt. Ltd under Rule 25 of Central Excise Rules, 2002 and Rs. 25,00,000 on the Director Shri Manoj Kumar Jain, under Rule 26 of the above rules, for his direction for fabrication of statutory records to give shelter to the offending goods, learned Commissioner(A) without examining the material facts, evidence and the law relating to anti evasion, framed a wrong issue in Para 8 of his order and came to an abrupt conclusion that neither redemption fine nor penalties imposable.
31. The respondents at no stage led any evidence to prove lawful possession of unaccounted excisable goods detected on the date of search i.e. 20.02.2004. Although it was a private limited company, its books of accounts were not found at the place of search giving rise to the inference that the same was not maintained. The manager Sri Lal ji Dubey failed to produce any records/documents relating to production and clearance of excisable goods except producing the records relating to job work done. Records were fabricated by one Raghunandan Agaarwal under specific direction of the director Sri Manoj Kumar Jain as is stated by him in his deposition recorded on 10.3.2004 and such records produced on 28.2.2004 for provisional release of the goods seized on 20.02.204. Statement of that accountant remained unchallenged by both the respondent. Similarly statement of Sri Dubey, manager recorded on 20.02.2004 remained un-assailed.
32. Learned Commissioner without framing the issue as to whether there was lawful possession of unaccounted excisable goods detected on the date of search and records fabricated and produced after 8 days of search shall exonerate the respondents from redemption file and penalties, he framed the issue as to whether confiscation and levy of penalty by adjudicating authority was proper. Duty of that authority was to first settle the facts and then apply the settled law to such settled facts. But he acted to the detriment of justice without going into the root of the matter. His decision therefore suffered from legal infirmity being perverse when records were fabricated under direction of the director of the respondent company and such fabrication remained unrebutted.
33. Being aggrieved by appellate decision of ld. Commissioner (Appeal) when Revenue came in appeal and evidence on record firmly established unlawful possession of excisable goods by the respondent company on the date of search without being supported by any evidence relating to purchase, acquisition and production thereof and books of accounts were fabricated to accommodate such unaccounted goods under specific direction of the director of the respondent company as revealed from Para 2.5 of the adjudication order, learned judicial member relying on certain decisions of the Tribunal as recorded in the order ordered to uphold the decision of learned commissioner (A), although Tribunal is final Court of fact and its duty is to test the material facts with evidence to reach to the conclusion. Learned Technical Member therefore disagreed with such decision recording in Para 28 of the order that where the respondent did not record the raw materials and finished goods detected in its factory on 20.2.2004 by search party, such goods were liable to confiscation and having regard to the quantum of duty sought to be evaded, levy of redemption fine of Rs. 15,00,000/- penalty of Rs. 3,50,000/-on the respondent company as well as levy of penalty of Rs, 1,50,000/- on the Director respondent would be proper and partly allowed Revenues appeal.
34. With the aforesaid background, following difference has been referred to the third member for opinion:
Whether in the facts of the case and the law applicable including the various decisions of judicial forums discussed, the seized goods are not liable to confiscation and the assessee company and Director are not liable to penalty as held by Member (Judicial) OR Whether in the facts of the case and the law applicable including the various decisions of judicial forums discussed, the seized goods are liable to confiscation and the assessee company and its Director are liable to penalties as held by Member (Technical).
35. While Revenue supported the order of adjudication and the order recorded by learned Member Technical, reverse was the argument on behalf of the respondent supporting the order recorded by learned Judicial Member.
36. When the materials on record proved possession of inventoried goods unaccounted and no statutory record produced before search party for verification and 8 days were taken from the date of search to fabricate the record as stated by Shri Raghunandan that ground alone is enough to hold that the respondent was making an attempt to evade excise duty but came to the scanner of investigation when they were red handed caught by the search party on 22.2.2004. Such practice of the respondent company proved its attempt to make clandestine clearance of the goods evading duty. It is elementary principle of jurisprudence that attempt precedes commitment. Therefore, possession of unaccounted excisable goods proved intention to evade duty making clandestine clearance. Preponderance of probability exposed ill intention of the respondents. Unlawful possession of unaccounted gods paves way for evasion. Attempt to evade is not wiped out or extinguished by the fabricated records produced. When the respondents acted malafide and attempted to evade in defiance of law, none of the decision relied by learned Judicial Member shall come to the rescue of the respondent evaders since fraud and justice do not dwell together and are sworn enemy of each other.
37. Once premeditated design as above surfaced, the offending goods were rightly confiscated and penalties imposed. Respondents miserably failed to rebut the allegations in the show cause notice. Making any interpretation of law contrary to its object of counteracting evasion, shall sanction unlawful possession of excisable goods to be lawful and encourage evasion. According to the clause (b) of sub-rule (2)(b) of Rule 25 of Central Excise Rules, 1944, where excisable goods produced or manufacture or stored is not accounted that shall be liable to confiscation under that rule read with section 11AC of the Central Excise Act 1944. In the present case, raw materials i.e., billets/ingots detected, finished goods i.e., copper wire and copper rolling scrap were found to be unaccounted on the date of search and also not substantiated by any evidence of lawful possession thereof. Raw material is excisable goods and an assessee enjoys cenvat credit thereon. That being possessed unlawfully by Respondent company and were unaccounted, such goods are covered by rule 25 read with section 11AC of Central Excise Act, 1944 for penal action. Similarly scrap detected not being disputed to be excisable goods, and being possessed unlawfully as well as unaccounted that is also covered by the said provisions of law for penal consequences. Further finished goods i.e, copper wire remained undisputed to be excisable goods and being unaccounted as well as unlawfully possessed, that also fell within the ambit of those provisions for anti evasion measure. Records not produced before Investigating Authority but fabricated and produced after 8 days of search does not make unlawful possession of excisable goods to be lawful possession of unaccounted goods following principles laid down in the case of Union of India vs. Dharampal Satyapal- 2013 (298) ELT 653 (Del.).
38. Intention to evade duty is patent from the questionable modus operandi followed by the respondents and investigation successfully proved its story. The respondents failing to lead any evidence and demolish the allegation in show cause notice as well as adjudication findings, they should not have gained misplaced sympathy by learned Commissioner (Appeals). That authority acted in defiance of law, interpreting the same to grant undue advantage to the respondents. Such undue advantage is bonus and incentive to encourage evasion. That is barred by law following the principles of law laid down by Honble High Court of Madras in the case of Alagappa Cement (P) Ltd. vs. CCE, Chennai 2010 (260) EST 511 (Mad.) and Honble High Court of Himachal Pradesh in the case of CCE vs. International Cylinders Pvt. Ltd. 2010 (255) ELT 68 (H.P.) and no one can be unjustly enriched at the cost of Revenue.
39. Entire evidence on record established intention of un-accounting of goods supported by unlawful possession thereof, a step to facilitate commitment of evasion. Narrow interpretation of economic offence and tax evasion adversely affects the public revenue. When there are believable reasons on record demonstrating aforesaid conduct of the respondents as well as their malafide, it shall irresistibly be concluded that there was an intention of evasion to the extent quantified in the adjudication. Such view is fortified from the principles of law laid down by the Apex Court in State of Maharastra V. Mohd. Yakub and others 1983 (13) ELT 1637 (SC).
40. In view of the above discussions, there appears no legal infirmity in the order recorded by learned Technical Member. That calls for upholding. Accordingly reference is answered stating that the seized goods are liable to confiscation and subject to redemption fine to the extent as has been held by learned Technical Member and both the respondents are liable to penalties to the extent specified by him.
41. Registry is required to place the record along with this order before the original bench to record majority order.
(Pronounced in the open Court on 10/01/2014).
(D N PANDA) JUDICIAL MEMBER Final Order
42. In view of the majority order, the Revenues appeal is allowed by imposing a redemption fine of Rs. 15,00,000/- (Rupees Fifteen lakhs only) and a fine of Rs.3,50,000/- (Rupees Three lakh and fifty thousand only) on the respondent M/s. Ganpati Rolling P Ltd. and of Rs.1,50,000/- (Rupees One lakh and fifty thousand only) on Shri Manoj Kumar Jain, Director.
( Archana Wadhwa ) Member(Judicial)
( Mathew John )
Member(Technical)
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