Judgment:
1. Vide the impugned order the authorities below have confirmed demand of duty of Rs. 2,13,392.98 (rupees two lakh thirteen thousand three hundred ninty two & ninty eight paisa) with imposition of personal penalty of equivalent amount under the provisions of rule 571(4). Apart from that HR coils and sprocket wheels I have been confiscated with option to the appellants to redeem the same on payment of redemption fine of Rs. 2,00,000/- (rupees two lakh). Personal penalty of Rs. 2,00,000/-(rupees two lakh) under the provisions of rule 209A has also been imposed on Shri Prahalad Kejriwal, Power of Attorney holder of the main appellants M/s. Rexon Industries.
2. Briefly stated the facts of the case are that the appellants who are manufacturers of cold rolled strips was visited by the officers on 21.7.97 at late hours. Inasmuch as no responsible person was available in the factory, the officers took into their possession the statutory records and documents. They subsequently visited the factory on 24.7.97 and undertook various checks and verifications. Joint stock taking was conducted and the officers found that the inputs stock of 88 coils of the thickness of 3.5 mm was lying in the factory. The total weight of the said 88 coils was to the tune of 165.60 M.T., whereas the weight of the coils as recorded in the appellants' RG-23A register was to the tune of 166.68 M.T. As such it is seen that the weight of the input coils was more or less in agreement with the recorded stock in their RG-23A records. However, the dispute relates to the type of the said 88 coils. As per the Revenue, they measured the coils in question and found that 91.65 M.T. of HR coils was in excess of the recorded balance and 92.48 M.T. of CR coils was short than the recorded balance. The above allegation was based upon the fact that on measuring the thickness of the coils the same was found to be 3.5 mm thus leading the allegations that there was excess of HR coils and shortage of CR coils.
Accordingly the excess found HR coils were seized.
3. Apart from the above the officers also seized 6700 pieces of sprocket wheels found in excess than the recorded balance in RG-1 register.
4. Subsequently on 18.8.97, 18 samples were drawn from the 47 seized coils as a result of appellants, request to draw samples from all the coils inasmuch as it was their contention that all the coils could not be measured by the visiting staff on the day of their visit. The measurement of 18 samples showed that the thickness of the same vary from 3.4 to 3.7 mm. Another samples of 13 more coils was drawn on 26.9.97 and 9 coils were found to be much below 3.5 mm.
5. Based upon the above factual position the appellants were served with a show cause notice raising demand of duty on the short found CR coils, proposing confiscation of excess found HR coils and sprocket wheels and also proposing imposition of personal penalties. The said show cause notice culminated into the impugned order passed by the original adjudicating authority. On an appeal against the above order, the same did not succeed before Commissioner(Appeals).
6. The appellants have attacked the above order on the ground that the stock of HR coils and CR coils taken collectively was more or less equivalent to the stock of coils as reflected in their RG-23A records.
They submit that all the coils were not measured by the visiting authorities on 24.7.97 and their contention that they were of 3.5 mm thickness is incorrect. It is their contention that such a huge stock of coils which was kept in the appellants; factory in a dumped condition cannot be practically measured by the officers within a span of 3-4 hours, for which they were in the factory. As such the application of 3.5 mm thickness to all the coils and on that basis to conclude that there was excess of HR coils and shortage of CR coils is based upon assumptions and presumptions. Explaining the case in detail Shri J.P. Khaitan, ld. adv. has drawn my attention to the various developments, as recorded in the impugned order. It is seen that Shri P. Kejriwal in his statement before the officers on the day of stock taking report has deposed that -"I d not know the exact thickness of 88 coils and the thickness of above 88 coils could not be checked as they are dumped likewise. I do not agree that all 88 coils are of 3.5 mm'.
Similarly in answer no.15 to a question put by the officers is stated - "In joint physical stock verification statement I did not notice about thickness. I had noticed only coil numbers. At present as all stock is lying in dumped position, thickness could not be ascertained". From the above deposition, it becomes clear that all the coils was not measured and the allegations is based upon by extending the thickness of a few of the coils to all the coils present ion the appellants' unit. There are also no inventories on record to show the measurement of all the coils in question. The thickness of the 18 coils sampled subsequently was found to be varying from 3.2 mm to 3.7. It is also noticed that the 9 samples out of the 13 samples drawn subsequently by the officers on 29.997, the thickness was found to be much below 3.5 mm. In these circumstances the findings of the authorities below that there was excess of HR coils and shortage of CR coils, especially when the total weight of the coils as physically when the total weight of the coils as physically found and as recorded in modvat records is tallied cannot be held to be sustainable.
7. As regards the confiscation of sprocket wheels it is seen that the appellants' contention was that the raw material in question was sent to their job workers under rule 57F(4) challans on July 13 and July 17, 1997 by making appropriate debits in RG-23A part-II. The goods found in excess on the day of visit of the officers was received in the appellants' factory on the same very day from their job workers' factory and were yet to be entered in the RG-1 register after counting, inspection and packing. This position also becomes clear from the deposition made by Shri Kejriwal that they had received same quantity of sprocket wheels from their vendors under challan. Inasmuch as the raw material had been sent to the appellants' job workers under rule 57F(4) the appellants were duty bound to enter the finally manufactured goods in their records and there was no escape for them for not entering the same in their records. Otherwise also I find that the goods in the factory premises could not be confiscated on the mere ground of non-entry in the records especially when the appellants have sufficient explanation for the same. Accordingly I hold that confiscation of the same was also not justified.
8. In view of my findings above, I hold that the order of demand of duty, confiscation of Hr coils and sprocket bills, imposition of personal penalties upon the two appellants is not sustainable. The same is accordingly set aside and both the appeals allowed with consequential relief to the appellants.