Customs, Excise and Gold Tribunal - Delhi
M/S. A.M.C. Coated Fabrics (P) Ltd. vs C.C.E., Meerut on 20 September, 2000
ORDER K. K. Bhatia, Member (T)
1. The appellants manufacture coated cotton fabrics falling under Chapter Heading 5903.19. On 31.5.94, their factory premises was visited by the Central Excise Officers and on physical verification, they noticed as follows:
(i) Completely finished coated cotton fabrics measuring 8000 mts. valued at Rs. 2 lakhs were found in the Sample Room. These fabrics were not accounted for. The same were accordingly, seized.
(ii) Modvat inputs, namely MEK and ADCL were found short on which the inadmissible credit worked out to Rs. 5,559.60, for which separate proceedings were initiated.
(iii) The party was maintaining private record called 'Production Register'. This Register was maintained for accounting the finished goods and the columns therein indicated date of manufacture, quantity manufactured and stored in the finishing room and quantity of goods transferred from the finished stage to RG.1 stage.
2. The RG.1 Register was maintained on the basis of entries made in this Production Register. On physical verification of the stock, it was found short by 3068.84 meters involving a total duty of Rs.53,705.00. In addition to it, the finished goods i.e., coated cotton fabrics measuring 1,945 mts. involving total duty of Rs. 32,439.75 were not accounted for in the RG.1 Register but were shown in the Production Register. Further, on scrutiny of records, the officers noted that certain Production Slips dt. 1.4.94 and 26.4.94 showed manufacture of 4,480.00 mts. coated fabrics involving duty of Rs. 78,400/- which were not entered in the production register. The officers further came across the invoices Nos. 739, 834 and No.15 covering 22,465.1 mts. of coated cotton fabrics involving a total duty of Rs.3,26,679.22. In addition to these papers, they also came across a consignment note No. 15786 dt. 24.5.94 issued by M/s. Shakti Road Carriers, Bombay showing supply of 80 bags of PVC powder weighing 2000 Kgs. sent by M/s. Shriji Plastics, Bombay to M/s. Hindustan Plastic Company, Delhi. Similarly, two slips showing receipt of grey cloth measuring 18,422 mts. was also recovered. These materials were not reflected in From IV Register.
3. Accordingly, the appellants were issued show cause notice dated 21.8.95, in which they were called upon to show cause why a duty of Rs.4,91,224.00 should not be demanded from then in respect of coated cotton fabrics valued at Rs.14,03,496.20 removed without payment of duty and why a penalty should not be imposed on them. Shri S.C. Goyal, Director of the party in the same notice was called upon to show cause why a penalty should not be imposed on him under Rule 209A.
4. On consideration of the replies of the noticee parties, the Commissioner of Central Excise, Meerut vide his Order Dt. 23.5.96 confirmed a demand of the aforestated amount on the party and further imposed a penalty of Rs.75,000/- on them. He also imposed a penalty of Rs.25,000/- on Shri S.C. Goyal, Director of the Company.
5. Both the above named parties are in appeal against the order of the Commissioner. I have heard Shri Gopal Prasad, Advocate for the appellants and Shri M.M. Dube, JDR for the respondent. I have considered the submissions made by both the sides. The one charge against the party is that during the course of physical verification of goods lying in the finishing room, 3,068.84 mts. of the coated cotton fabrics were found short and another quantity of 4,480.00 mts. of coated cotton fabrics were not accounted for in the production register though accounted in the production slips. Further, fabrics measuring 1,945 mts. were not show in the RG.1 register but were shown in the production register. All these goods involved duty amounting to Rs. 1,64,545/-. The party contended before the Commissioner that there was no shortage or clearances made without payment of duty of these quantities. The sum total (7548.84 mts.) of these quantities, related to 8000 mts. found in exces in the Sample Room for which a separate Show Cause Notice had been issued. It was also contended that the difference of 500 mts. was on account of the fact that there was no physical measurement of 8000 mts. of fabrics lying in the samples room, subject matter of another show cause notice. It was contended that the discrepancies so noticed by the Department were at finishing stage entries and not at finished RG.1 register entries. These submissions of the party have been rejected by the Commissioner in his order with the observation that they do not stand on sound footing, as the stock verification was conducted in the very presence of the authorised signatory of the noticee which is buttressed by the Statement dt. 31.5.94 of Shri Krishan Gupta, General Manager of the appellant's Company who admitted that they were maintaining the production register in which total quantity of coated cotton fabrics manufactured by them was entered. The Commissioner in his order has further observed that the production register revealed that it has duly been certified by the authorised signatory of the unit and that from this it could easily be inferred that it was their basic internal document in which production was initially entered. Therefore, it is observed that the plea of reconciling of shortage of 3068.48 mts. of goods lying in the finishing room, as per production register and 4480 mts. of coated cotton fabrics not accounted for is not tenable, more so when still there is shortage of 500 mts. Besides this, the excess of 8000 mts. of sample of coated cotton fabrics was acknowledged by the authorised signatory of the noticee which is an ample proof that all these three shortages and excesses were different. The plea of the party that the discrepancies noticed by the Department were only at finishing stage entries and not at the finished RG.1 stage entries in the view of the Commissioner is self-contradictory, as they had themselves admitted that initially they took the production in the production register instead of RG.1 and the Rg.1 stage of the coated cotton fabrics is when they are made into rolls. Therefore, this plea of reconciliation of excess and shortages is held to be nothing but an after-thought. With regard to these findings of the Commissioner, it is observed that the defence of the party with regard to the shortages found on physical verification and based on the production slips etc. are in-extricably linked with the 8000 mts. of coated cotton fabrics found in the sample room unaccounted for and accordingly seized. The seizure of 8000 mts. of coated cotton fabrics is the subject matter of another proceedings in respect of which a separate show cause notice dt. 24.11.94 is issued to the party. The defence of the party is that in reality, there is no shortage or clearance without payment of duty as sum total of the fabrics not accounted for in the production register and found short during the course of physical verification was in fact, lying in the sample room. The party would have taken the same defence in the proceedings initiated against them under the Show Cause Notice dt. 24.11.94 in respect of the seizure of 8000 mts. of the fabrics. Therefore, I am of the view that the findings in respect of the above proceedings are crucial to the present case. In fact, it appears that the findings arrived at in those proceedings would be binding on the adjudicating authority and he has to reckon with such findings in arriving at the final decision in the present matter. Since the Commissioner has not taken into consideration the findings arrived at in the above stated proceedings, his order so far as it relates to the shortage of 7548.48 mts of coated cotton fabrics -is vitiated and consequently the same will call for de-novo consideration.
6. With regard to the allegation of coated cotton fabrics removed without payment of duty vide invoice No. 729, 834 and 15 valued at Rs. 9,33,369.20 involving duty of Rs.3,26,679.22, it is contend that the invoices (Nos. 739 & 834) were rough papers and no inference could be drawn with regard to the evasion of Central Excise duty thereon. It is stated that these are not real invoices, as they did not tally with the proforma maintained by them. It is further contended that these invoices were issued in favour of M/s. Urethane Coaters (P) Ltd., G.T. Karnal Road, New Delhi-33 which is their sister unit lying closed since March, 1993. As regards the invoice No. 15, it is contended that it is not an invoice but only a document in which the particulars of the goods have been described as eight rolls of cotton cloth rejected and returned due to inferior quality. Hence, this cannot form the basis of demand especially, since the Department has itself on verification from M/s. Mittal Fabrics, Delhi - the party named in this invoice, found no such fabrics received by them. On this submission of the party, the Commissioner in his Order has observed that the inovices Nos. 739 and 834 contained the details of the goods cleared by them. The particulars reflected in them revealed the numbers of the roles or rexin cloth, value and truck No. and the place i.e., M/s. Urethane Coated (P) Ltd. G.T. Karnal Road, New Delhi-33, a sister unit of the party - to which the goods were sent. The party had been clearing these goods under the cover of these invoices. These invoices are duly signed by the representative of the party. These invoices are recovered from the miscellaneous file, the contents of which are not disowned entirely by the party. With regard to the invoice No. 15, the Commissioner has observed that the defence put forth by the party is not sustainable in view of the fact that as per Rule 53 of the Central Excise Rules, all the cotton cloth being the raw material, is to be entered in Form IV Register and its disposal is also to be shown in the same. He has observed that no entry was made on 21.5.94 in Form IV Register, which is the date of the invoice No. 15. This would indicate that no raw material was removed on this date under this invoice. It is further observed that M/s. Mittal Fabrics to whom the goods were shown to have been sent under this invoice, on enquiry have denied the receipt of the same. The Commissioner in his order has thus concluded that the finished goods were cleared in the garb of rejected cotton fabrics under invoice No.15. With regard to the findings of the Commissioner in respect of invoices Nos. 739 and 834, it is observed that the same relate to the particulars reflected in these invoices. The invoices contained the description of the goods, their quantity and the value. It is also admitted that the same were issued in favour of the sister unit of the party viz., M/s. Urethane Coated (P) Ltd., G.T. Karnal Road, New Delhi-33. Therefore, the findings that these goods were cleared without payment of duty cannot be faulted, as the same are supported by the firm particulars mentioned in the documents seized from the custody of the appellants. Thus, the duty involved in all these goods has to be confirmed. However, the same view cannot be held in respect of the invoice No.15 dt. 21.5.94. This invoice does not contain any specific particulars of the goods covered by it. M/s. Mittal Fabrics in whose favour, this invoice is stated to have been issued - on enquiry have also denied the receipt of any such goods. Therefore, the party has to be given the benefit of doubt in respect of this invoice.
7. In view of the above analysis, therefore, the order of the Commissioner as regards the confirmation of the duty on the shortage of 7,548.84 mts. of coated cotton fabrics is set aside and the matter remanded to him for de-novo consideration in the light of the observation made above. The confirmation of demand of duty of Rs. 1,56,806.72 in respect of the goods covered by the invoices Nos. 739 & 834 is upheld and the duty demand of Rs.1,69,872.50 on the invoice No.15 is set aside. In view of this modifications, the penalty imposed on M/s. AMC Coated Fabrics (P) Ltd. is reduced to Rs.25,000/- (Rs. Twenty five thousand only). Since, there are no clear findings against Shri S.C. Goyal, Director of M/s. AMC, the penalty imposed on him is set aside.
8. With regard to the remand part of this order, the appellants shall be afforded a reasonable opportunity of hearing to state their case before taking a final view.
9. The appeals are thus disposed of in the above terms.