Judgment:
1. This appeal has been filed by the appellants against the impugned order-in-appeal dated 2-7-2002 vide which the Commissioner (Appeals) has modified the order-in-original only in respect of penalty, but upheld the same regarding confiscation of the goods, duty and penalty on the appellants.
2. On 25-2-92, the Central Excise officers visited the factory premises of the appellants and found that the goods were being loaded by the appellants in a tempo parked in front of the gate of the factory. On enquiry, Shri Deepak Kumar, representative of the appellants who was supervising the loading at that time, revealed that the loaded goods were PVC compound. But no GP-I at that time in respect of those goods was prepared. Thereafter, physical stock verification was carried out and 8,780 kgs of PVC compound (including 3,600 kgs loaded in the tempo) valued at Rs. 3,08,160/- involving excise duty of Rs. 86,011.20, was found in excess of the recorded stock. Besides this, 14,335.6 kgs of PVC resin and 2,068.735 kgs DOP, LS involving duty of Rs. 1,76,796.22 were also found short of the recorded stock. Consequently, show cause notice was served on the appellants for payment of duty on the short stock with penalty. The confiscation of the goods found in excess were also proposed in that notice. The notice was also issued to the owner of the tempo for confiscation. The appellants controverted the allegations of the show cause notice and averred that the tempo loaded with the goods was still standing at the gate of the factory and as such, there was no removal of the goods by them. Regarding the shortage of the inputs, they averred that the same were utilised in the manufacture of the finished goods which were found in excess and other semi-finished goods, lying in the factory. The excess goods found in the factory, did not reach the stage of finished goods as testing as per ISI was appellants and ordered confiscation of excess goods, confirmed the demand for the goods found short and imposed penalties and fixed redemption fine for redemption of the goods as detailed in the order-in-original. That order had been affirmed by the Commissioner (Appeals) except for modification in the penalty.
3. I have heard both sides and gone through the record. The perusal of the record shows that the total goods found in excess of the recorded stock were 8,780 kgs of PVC compound. This figure included 3,600 kgs of goods found loaded in the tempo parked at the factory gate of the appellants. Regarding the goods lying in the factory, the appellants had from the very beginning maintained that those goods had not attained the finished stage as testing as per ISI was required to be carried out in respect thereof. The entry in the relevant record was to be made only after the testing as without ISI testing, the goods could not be marketed. This stand of the appellants had not been controverted by the authorities below. Therefore, the same could not be ignored while ordering the confiscation of the goods and imposing redemption fine. The entry was to be made by the appellants only when the goods had attained the finished stage after the testing as per ISI and as such, the same could not be legally confiscated.
4. However, the goods weighing 3,600 kgs which were found loaded in the tempo parked at the factory gate, the appellants were required to make entry in the relevant record as those goods could be said to have attained the finished stage and that is why, were being removed for marketing. Therefore, for non-accountal of these goods, confiscation could be legally ordered by the authorities below. The impugned order of the Commissioner (Appeals) is consequently modified in this regard.
In other words, confiscation in respect of goods weighing 3,600 kgs.
(PVC compound) is maintained, while regarding the rest of the goods, the same is set aside. The redemption fine is, therefore, also reduced from Rs. 1 lakh as confirmed through the impugned order, to Rs. 10,000/-. The penalty for this lapse under Rule 173Q/226 of the rules is also reduced to Rs. 5 thousand.
5. The impugned order also shows that duty of Rs. 1,76,796.22 in respect of inputs found short has been confirmed on the appellants by assuming that out of those inputs, goods had been clandestinely manufactured and cleared by the appellants. But there is not an iota of evidence to prove the clandestine manufacture and removal of the goods by the appellants. No statement of any buyer was recorded to whom the goods were allegedly sold by the appellants. During the course of investigation, the appellants never admitted of having removed the goods in a clandestine manner, after manufacturing out of the inputs found short in the stock. Rather their stand had been that the goods found in excess in the factory were produced out of the inputs which were found short in the stock. In other words, according to them, the inputs allegedly found short were utilised by them in the manufacture of the goods which were still lying in their factory premises awaiting the testing as per ISI. This plea of the appellants had not been considered at all. In my view, their plea deserves to be accepted when the goods were found in excess of the recorded stock in the factory premises, the same were produced by utilising the inputs (raw materials). It is not the case of the Revenue that for the excess goods found, some other raw material was utilised or that there was no co-relation between the raw material and the goods found in excess in the factory premises of the appellants. No evasion of duty in respect of the goods found in excess was alleged against the appellants as the same were yet to be cleared by them after test as per ISI. Therefore, no duty demand in respect of the inputs/raw materials found short in the factory and utilised in the manufacture of the finished goods found lying in the factory, could be legally confirmed against the appellants. Therefore, the impugned order confirming the duty of Rs. 1,76,796.22 under Section 11A of the Act cannot be sustained and is set aside.
6. From the record, it is also evident that the adjudicating authority imposed penalty of Rs. 3 lakhs under Rules 9(2), 173Q and 226 of the Rules and Section 11AC But the Commissioner has taken the view that no penalty under Section 11AC and Rule 9(2) could be imposed. However, he has maintained the penalty under Rules 173Q and 226 of the Rules, without specifying the amount of penalty under these rules. The penalty under these Rules, is reduced to Rs. 5,000/- keeping in view the fact that non-accountal by the appellants was only in respect of 3,600 kgs.
of goods (PVC compound) as discussed above.
7. In view of the discussion made above, the impugned order of the Commissioner (Appeals) stands modified to the extent discussed above.
The appeal of the appellants stands accordingly disposed of with consequential relief permissible under the law.