Customs, Excise and Gold Tribunal - Delhi
Blue Blends (India) Ltd. vs Commissioner Of Central Excise on 19 November, 2003
Equivalent citations: 2004(163)ELT238(TRI-DEL)
ORDER
V.K. Agrawal, Member (T).
1. In these three appeals, arising out of a common Order-in-Original No. 11/98, dated 29-12-1998, the issue involved is whether Central Excise Duty is demandable from M/s. Blue Blends (India) Ltd. and penalty is imposable on them along with other Appellants and whether the excisable goods are liable for confiscation.
2.1 Sh. K.K. Anand, learned Advocate, submitted that M/s. Blue Blends (India) Ltd., Appellants No. 1, manufacture Cotton Denim Fabrics; that the Central Excise Officers visited their factory premises on 20-9-1997 and effected seizure of 2,31,105 LMs of fabrics valued at Rs. 1,72,14,125/- on the ground that the same was fully manufactured and not entered in RG 1 Register; that the Officers also seized 12 invoices under the belief that the fabrics mentioned therein was cleared without payment of duty; that the Commissioner, under the impugned Order, has confirmed the demand of duty in respect of fabrics alleged to have been removed under the seized invoices, confiscated the seized goods with an option to redeem the same and imposed penalties on all the three Appellants. The learned Advocate, further, submitted that they purchase yarn from outside which is subjected to dyeing and weaving of fabrics; that the fabrics is subjected to process of singeing and Zero-Zero process and is thereafter folded in rolls; that these are loosely covered by plastic bags so that no damage is done to the fabrics; that in the process of manufacture of denim fabrics, a lot of blue fluff is generated which is deposited on the walls and materials lying in the factory and, therefore, denim folded in rolls is covered so that there is no damage to the colour of the fabrics by deposition of the indigo fluff; that the rolls are stacked horizontally and plastic patti is kept on the roll in order to prevent it from collapsing during internal movement and to keep the roll intact before final packing is done; that as long as the fabrics remain in this loose condition, no packing slip is kept in the roll and excise and bale number is written on the roll; that this facilitates showing the fabric to the buyers for approving the quality prior to despatch.
2.2 He emphasised that the loose stock of rolls are recorded in loose RG 1 Register for loose fabrics regularly which has been authenticated by the Range Officers of Excise; that at the time of despatch, the loose bag wrapped on the cloth roll, is stiched after inserting the packing slip and then excise and bale numbers are written on the bags which are then removed to the bonded store room where stock is recorded in the finished RG 1 Register, that they had followed this practice of accounting for the goods in RG 1 Register from the very inception of their factory. He contended that the said practice has the approval of the Department inasmuch as the loose RG 1 was duly authenticated by the Central Excise Officers; that the stock of the goods deposited in the bonded store room was found to tally with RG 1 Register; that as such it cannot be alleged by the Department that the seized goods were not accounted for as the same had been duly entered in the authenticated loose RG 1 Register. He relied upon the decision in the case of Pepsi Foods v. C.C.E., Chandigarh, 2002 (139) E.L.T. 658 (T) wherein it has been held by the Tribunal that when the assessee has its own detailed system of accounting production in production slip and thereafter goods are transferred to the store room under serially numbered Transfer Slips, there was no mala fide intention to evade duty and that non-entry of the production in RG 1 Register on daily basis is only an administrative lapse meriting acceptance. Reliance has also been placed on the decision in the case of Kalvert Foods India Pvt. Ltd. v. C.C.E., Mumbai, 2003 (152) E.L.T. 131 (T) and Raza Textiles Ltd. v. C.C.E., 1989 (44) E.L.T. 233 (T). The learned Advocate also mentioned that the demand of Rs. 3,81,586/- has been confirmed on the ground that the goods, mentioned in the invoices recovered from the factory premises, were cleared without payment of duty; that these invoices, in fact, had been cancelled on account of various reasons such as the selling rate was not properly applied, the buyer had changed his quantity requirement; that the appellant had committed the mistake in preparing the invoices with the same serial numbers instead of cancelling the same and preparing new invoices; that it is apparent from the fact that the bill numbers appeared on both the invoices which goes to show that the goods were cleared only on payment of Central Excise Duty; that no despatches of the fabrics have taken place against the recovered invoices; that this fact could even be checked from the register meant for factory gate passes maintained by the watchman which is in the possession of the Revenue. Finally, he submitted that in any case the redemption fine of Rs. 20 lakh is on very high side which, in the circumstances of the cases, may be reduced considerably; that no penalty is also imposable and in any case the penalty imposed is on very higher side; that the penalties are not imposable on Shri Ajit Sampatrai Ranka, Factory Manager and Rajendra Vadilal Shah, Vice President (Technical) as no particular role having been played by them in the commission and the alleged offence has been disclosed either in the show cause notices or has been established in the impugned order; that no material whatsoever, has been disclosed that they have any knowledge of the goods being liable to confiscation; that, therefore penalty under Rule 209A of the Central Excise Rules, 1944 cannot be imposed on them.
4. Countering the arguments, Ms. Charul Baranwal, learned SDR, submitted that in his statement dated 20-9-1997, Shri Ajit Sampatrai Ranka, who looks after Excise work, has admitted that the Central Excise invoices, recovered from the factory premises, did not tally either for consignee or for quantity or value of the goods cleared under the cover of those invoices and were removed without payment of duty; that the appellants had immediately deposited the entire amount of duty also; that Shri Rajendra Vadilal Shah, Vice President, also stated before the Panch Witnesses that the goods were removed without payment of duty and the goods, covered by those invoices, were not shown in the Central Excise records. The learned SDR, further, contended that out of six copies of each invoice, prepared by the appellants, only one copy of each invoice was recovered and the remaining copies were not found; that if the invoices were cancelled, as claimed by the appellants, all the six copies should have been found together; that this goes to show that the goods had been cleared under these invoices without payment of duty. She, further, submitted that during the search of the office premises, the Central Excise Officers also recovered and seized a single hand operated 'Numbex' a numbering machine, which had been used for putting serial numbers on the loose fake invoices under the cover of which the goods were cleared without payment of duty. Regarding denim fabrics, which was seized, being not accounted in the statutory RG 1 Register, learned SDR submitted that, admittedly, the fully manufactured fabrics was found outside the store room, which had not been entered in the statutory record; that Sh. Ranka had admitted in his statement that denim fabrics, duly processed and packed in HDPE bags and tied with the plastic strips, was ready for despatch and was in marketable condition; that law does not permit for maintenance of two sets of RG 1 Registers; that the goods, lying in the finished room, are required to be entered in RG 1 meant for approved store room; that Sh. Ranka had admitted in his statement dated 20-9-1997, that the seized goods did not require any further processing and were fully processed; that, therefore, the goods are liable for confiscation under Rule 173Q(1) of the Central Excise Rules; that no mala fide intention is necessary for confiscating the goods and imposing penalty under provisions of Clauses (a), (b) or (c) of Sub-rule (1) of Rule 173Q of the Central Excise Rules, 1944.
5. We have considered the submissions of both the sides. It has not been disputed by the appellants that a quantity of 2,31,105 LMs of cotton denim fabrics was found unaccounted in the RG 1 Register. It is also not the case of the appellants that further processing of the said fabric was required and it was not fully finished fabrics. It is the requirement of the Central Excise Rules that fully manufactured goods are required to be entered in RG 1 Register on daily basis. By not entering the said goods in the statutory RG 1 Register, the appellants have contravened the provisions of Central Excise Rules and accounts of which goods are liable for confiscation under Rule 173Q(1) and the penalty is imposable on the appellants. The appellants have only contended that since inception of their factory, they have been following the practice of keeping the processed goods in loose condition which facilitated them to show their goods to their customers for approval. The law requires that the fully finished goods are to be entered in the production register and should be kept in the store room. It has been held by the Bombay High Court in the case of Kirloskar Bros. Ltd. v. U.O.I, 1988 (34) E.L.T. 30 (Bom.); that "Clauses (a), (b) and (c) of Sub-rule (1) or Rule 173Q do not admittedly use the expression "with intent to evade payment of duty", which is found in Clause (d) thereof. It can, therefore, be prima facie assumed that the liability in terms of Rule 173Q(1), Clauses (a), (b) and (c), does not depend upon mens rea". Further, the Supreme Court in the case of Zunjarrao Bhikaji Nagarkar v. Union of India, 1999 (112) E.L.T. 772 (S.C.) has held, while interpreting Rule 173Q, that "both things are necessary; (i) goods are liable to confiscation; and (ii) the person concerned is liable to penalty. Accordingly, we hold that the goods, which were in fully finished conditions and were found unaccounted for in statutory record are liable for confiscation. However, considering the fact that the goods were entered in loose register, which was also authenticated by the Department, we reduce the redemption fine from Rs. 20 lakh to Rs. 5 lakh.
6. As far as the demand of duty, in respect of recovered invoices is concerned, we observe that both Sh. Ajit Ranka and Sh. Shah, Vice President, had admitted in their statements that the goods, mentioned in those invoices, had been cleared without payment of duty. The appellants have not succeeded in rebutting the findings given by the adjudicating authority in the impugned order. We uphold the demand of duty confirmed by the adjudicating authority against the appellants. The penalty is also imposable on the appellants for clearing the excisable goods, without payment of duty. Taking into consideration the fact that the duty involved was paid immediately by the appellants, we hold that the interest of justice will be met if a penalty of Rs. 2 lakh only is imposed on the appellants. We order accordingly. Coming to the penalties imposed on other two appellants, we observe that Sh. Ajit Sampatrai Ranka is the authorised signatory for the purpose of Central Excise and the goods, fully processed, have been found to be not accounted for in the statutory R.G. 1 Register and excisable goods have been cleared from the factory without payment of duty. These facts are within his knowledge. The clearance of goods without payment of duty or not entering the goods in the statutory register, make them liable for confiscation. Accordingly, Sh. Ranka cannot plead that he did not know that the offendist goods were liable for confiscation under the Excise law. Therefore, the penalty is imposable on him. The amount of Rs. 10,000/- imposed on him is quite reasonable, which is upheld by us. As far as the penalty on Sh. Rajendra Vadilal Shah, Vice President is concerned, no material has been brought on record by the Revenue to show that he had any knowledge about the confiscability of the goods as he used to sit in the Market Office of the Appellant Company and not in the factory premises. We, therefore, set aside the penalty imposed on him.
7. All the three appeals stand disposed of in the above manner.