Full Judgment
2. The proceedings were initiated against the appellants and they were issued a show cause notice on 26-6-1992 by the Assistant Collector of Central Excise, MOD-I, New Delhi calling upon them why the aforesaid quantity of wall clocks not accounted for in their RG 1 Register should not be confiscated, why the Central Excise Duty of Rs. 12,314/- on 4390 pieces of wall clock cabinets found short should not be demanded from them. They were further called upon to show cause why the Central excise duty of Rs. 36,002.98ps. equivalent to the Modvat credit availed on 18,903 pieces of clock movements found short should not be recovered from them.
3. On consideration of the submissions made by the appellants, the Deputy Collector of Central Excise, New Delhi vide his order-in-original dated 31-3-1993 ordered for confiscation of 4930 pieces of wall clocks. He, however, gave an option to the party to redeem the same on payment of Rs. 50,000/-. He also confirmed the duty of Rs. 12,314/- in respect of the wall clock cabinets found short. He further ordered for the recovery of duty/Modvat credit amounting to Rs. 36,002.98ps. availed by the party on 18,903 pieces of clock movements found short. He, further, imposed penalty of Rs. 25,000/- on them.
4. The appeal of the party before the Collector of Central Excise (Appeals) did not succeed and Commissioner (Appeals) vide his order dated 28/31-1-1994 dismissed their appeal upholding the order-in-original passed by the Deputy Collector.
5. The present appeal is against the aforesaid order of the Commissioner (Appeals), Delhi.
6. I have heard Ms. Reena Khair, Advocate for the appellants and Shri T.A. Arunachalam, JDR for the Respondents. It is submitted that 4905 pieces of wall clock found in excess were manufactured during the week prior to the date of the visit of the Central Excise Officers. They were in fact tested and packed on that day only and as such they were yet to be entered in the RG 1 Register. It is also stated that the production of the day was not taken into consideration while determining the excess quantity unaccounted for. With regard to the shortage of 4390 pieces of wall clock cabinets it is stated that the shortage was not real as the cabinets in question were used by them in the clocks which were found in excess. As regards the shortage of 18903 pieces of the clock movements, it is submitted that this shortage is in respect of the period from July, 1987 to 31-12-1991. It is stated that this shortage is on account of the wastage during the manufacture of clocks. The appellants have relied upon the Rule 57D(1) which provides that no credit of duty allowed on the inputs shall be denied on the ground that parts of the inputs have contained in the waste, refuse or by-product. The ld. Counsel for the appellants has relied on the following citations in support of submissions.
1. Global Enterprises v. CCE, Chandigarh -1987 (32) E.L.T. 430 (Tribunal).Sit. Nasiruddin Biri Merchants Pvt. Ltd. v. CCE - 1991 (54) E.L.T. 338 (Tribunal).
7. The ld. JDR for the Revenue has reiterated the findings of the Deputy Commissioner and those of the Commissioner (Appeals).
8. I have carefully considered the submissions made before me. The facts of the case as narrated above are not in dispute. The submissions made before me by the ld. Counsel for the appellant are the same as made before the original as well as the appellate authorities below.
The findings of these authorities on each of the submissions of the party are recorded in their respective orders. In respect of the excess stock of 4950 pieces of the wall clocks, it is observed that Panchanama dated 31-12-1991 was drawn in the presence of Shri Mahinder Bathla, Partner of the firm and two independent witnesses. The Panchanama states that these wall clocks were completely in packed condition at the time of seizure which is also admitted by Shri Bathla in his statement of the even date. Shri Bathla also stated that the goods could not be entered in the RG 1 account since their excise clerk was on leave for the preceding week. Therefore, the contention that the goods were tested and packed on that day only and on that ground they had not reached RG 1 stage, is only an after thought, it is observed.
The submission about shortage of 4390 pieces of wall clock cabinets is that these cabinets were used in the wall clocks numbering 4950 pieces found in excess. This plea of the party has been dismissed by the lower authority by observing - if these cabinets had been utilised captively in the manufacture of wall clocks, the same should have necessarily been accounted for in due course. They have not even clarified as to why entries of these goods could not be made. The shortage has been noticed on the basis of the records maintained by themselves. They have also failed to produce any documentary as well as any other evidence to prove their contention. In this regard it is observed that the appellants were manufacturing cabinets which were consumed captively by them for the manufacture of wall clocks. No doubt they had not maintained their records properly so as to reconcile the shortage of the cabinets with those of the excess of the wall clocks, nevertheless it is an uncontroverted fact that the wall clocks manufactured by them were used only with the cabinets manufactured in their own factory.
Therefore it would be a fair proposition to accept the submission that the quantity of wall clocks found in their premises on stock verification must have used the cabinets made in their own factory.
Therefore this explanation of the appellants appears plausible and the same is accordingly admitted.
9. With regard the explanation for the shortage of 18,903 pieces of clock movements (inputs), the party has contended that the same has occurred on account of wastage during the manufacture of clocks. They have stated that in terms of the Rule 57D(1), the Modvat credit on such wastage is not liable to be denied to them. The observation of the original authority with regard to this submission of the party is that the clock movements are normally purchased/imported in a fully manufactured condition and they are simply fitted in the clocks cabinets, therefore the question of waste thereof during the course of manufacture of wall clocks does not arise. They have also neither maintained any account for such waste nor that of the disposal of the same. In such a situation, the explanation of the party is not convincing, I do not find any discrepancy in these findings of the lower authority and the same are accordingly confirmed.
10. In view of the above analysis the demand amounting to Rs. 12,314.00 in respect of 4390 pieces of wall clock cabinets confirmed on the appellants is set aside. The penalty of Rs. 25,000/- imposed on them is reduced to Rs. 15,000/-. But for this modification the appeal otherwise fails and the same is dismissed upholding the order of the Commissioner (Appeals).