Customs, Excise and Gold Tribunal - Mumbai
Bunty Foods (I) Pvt. Ltd. vs Commissioner Of C. Ex. on 29 September, 1999
Equivalent citations: 2000(115)ELT400(TRI-MUMBAI)
ORDER J.H. Joglekar, Member (T)
1. These three stay applications relate to three appeals arising out of the same order of the Commissioner. These three are taken up together for disposal vide this common order.
2. M/s. Bunty Foods (I) Pvt. Ltd. manufactured biscuits on job work basis for M/s. Parle Products Ltd. under an agreement. For quality control and coordination purposes an official of M/s. Parle Products Ltd. used to sit in the factory of M/s. Bunty Foods (I) Pvt. Ltd. On a visit to the premises of the job worker, a quantity of broken biscuits was noticed by the officers. The same was not found to have been entered in the RG1 register and was therefore seized. Later on statements of the people concerned with the two units were recorded. Shri Vinod Jashnani the director of M/s. Bunty Foods, stated that the broken or rejected biscuits were not accounted for in the statutory register nor had any classification declaration been filed in their regard. He stated that the statistics relating to these biscuits were maintained separately. A part of these biscuits was ground and added back to the raw materials for making fresh biscuits. Although he referred to the register in his statement on 12-4-1997, he was unable to present the same since it was in the possession of another official. His further statement was recorded on 15-4-1997 when he produced this register. The statements of officials of Parle Products were also recorded wherein it was revealed that certain brands of biscuits manufactured by Parle Products in broken condition were cleared for sale. Shri S.R. Agarwal, business development manager of Parle Products, in his statement claimed that in the case of Bunty Foods, such broker biscuits were recycled. The register produced by Vinod Jashnani was scrutinized by the officers. It was found that the proportion of broken biscuits was 3.74% of the total production. In view of the fact that these biscuits were not recorded, the officers presumed that such biscuits were clandestinely cleared without payment of duty. Adopting the percentage of broken biscuits shown above, similar calculations were made for the previous years resulting in the estimate of value to the extent of Rs. 70,56,214.54 during the period 1992-93 to 1996-97. Show cause notice was issued seeking recovery of duty amounting to Rs. 37,05,621.25. For their action of not recording the production of broken biscuits as well as sugar syrup and for not filing the classification list for the sugar syrups and for evading payment of duty allegation as to penalty was separately made against Vinod Jashnani as well as M/s. Parle Products. After hearing the noticees, the Commissioner of Central Excise, Mumbai-III passed the impugned order. In this order the Commissioner confirmed the duty, imposed equivalent penalty under Section 11 AC of the Central Excise Act, 1944 and under rule 173Q of the Central Excise Rules, 1944 on Bunty Foods. He confiscated the used biscuits but permitted their redemption on payment of fine. He imposed a penalty of Rs. 3,00,000/- on Vinod Jashnani and of Rs. 2,00,000/- on Parle Products. He refrained from ordering confiscation of plant, building etc. Flence these appeals and the present applications.
3. Shri D.B. Shroff submitted that the entire proceedings were based merely on presumption. He stated that it was the consistent claim made by the assessees that the broken biscuits were not cleared but were recycled for the production of further biscuits. The policy of sale of broken biscuits by Parle Products was not adopted by Bunty Foods. He stated that whereas the register relating to production and consumption of broken biscuits had been relied upon by the department to calculate the amount of duty allegedly evaded in the earlier period, the very register had been dismissed as an invalid document by the Commissioner himself in his order. It is his submission that if this belief is correct then the entire basis of show cause notice is demolished. It is his submission that the non-maintenance of accounts of sugar syrup and broken biscuits was due to the belief of the assessees that the goods were not excisable and that for this offence penalty imposed was disproportionate.
4. Shri K.L. Ramteke strongly supports and defends the Commissioner's orders.
5. We have carefully gone through the submissions made and have seen the documents.
6. The agreement between Bunty Foods and Parle Products referred to rejected wrapping material and burnt / over-baked / under-baked biscuits and directed that they be destroyed by Bunty Foods. The summary of the agreement made by the Commissioner in para 49 of his order does not speak about the unpacked / broken biscuits. It is the claim made by Vinod Jashnani of Bunty Foods as well as S.R. Agarwal of Parle Products that such broken biscuits were ground up and recycled. This claim is supported by a register which shows the production of broken biscuits and their consumption in recycling activities. This register was referred to in the statement of Jashnani made on the same day as the visit of the officers. The entire show cause notice proceeds on the assumption that this register was a proven document. The case of the appellants Bunty Foods that these broken biscuits were recycled is borne out by this register.
7. The logic that since Parle Products were clearing a quantity of broken biscuits and therefore such biscuits were cleared by Bunty Foods is therefore not supported by it.
8. Therefore at this stage the appellants had made a strong prima facie case in their favour. At the same time we find that the fact that broken biscuits were excisable and dutiable products was known to the biscuit manufacturers as is evident from the practice adopted by Parle Products. The plea of lack of knowledge on this count lacks force. The excisability of sugar syrup is an issue which has been debated in the circles of food manufacturers for the last 20 years and it is surprising that the claim is made that the assessees were ignorant of the excisability of sugar syrup. It is however correct that the quantum of penalty imposed may not have been proportionate to this offence.
9. We therefore waive the condition of pre-deposit of the duty confirmed on M/s. Bunty Foods (I) Pvt. Ltd. and stay the recovery thereof during these proceedings. We direct M/s. Bunty Foods (I) Pvt. Ltd. to deposit a sum of Rs. 1,00,000/- towards the penalty imposed upon them. The need to pre-deposit the penalties imposed on Vinod Jashnani and on M/s. Parle Products Ltd. as a pre-condition to hearing of their appeals is waived and their recovery stayed during these proceedings. M/s. Bunty Foods (I) Pvt. Ltd. Are given a period of four weeks to make the deposit. Compliance to be reported on 6th October, 1999.