Full Judgment
2. Factual Backdrops : The appellants are Khandsari Sugar manufacturers and working under the Special Procedure provided in Chapter V/C-I of the Central Excise Rules, 1944. It is alleged that during a surprise visit of the appellant Factory on 20.1.1982, the Central Preventive Officers found the appellants manufacturing khandsari sugar by way of clandestine operation of the Centrifugal. It was also found that for the purpose of clandestine operation of the Centrifugal they broke open the official seal affixed on the Centrifugal. It was further found that the appellants were manufacturing khandsari sugar without discharging their duty liability for the 3rd week of January, 1982. Statement of Shri Rajpal Singh was also recorded on the spot. The officers also seized 30.75 Qtls. of khandsari sugar found in the Factory. As a follow up action a show cause notice calling upon the appellants to show cause as to why the seized khandsari sugar be not confiscated and the duty amounting to Rs. 6,893.00 be not demanded for the 3rd week of January, 1982 and penalty be not imposed was issued. It appears that no reply was submitted by the appellants to the show cause notice and therefore, the Assistant Collector, Central Excise & Customs, Moradabad decided the case ex parte on the basis of the evidence available on the record and ultimately ordered for the confiscation of the seized khandsari sugar weighing 30.75 Qtls. with an option to redeem the same on payment of a Redemption Fine of Rs. 5,000/- and also demanded the duty amounting to Rs. 6,893/-. The Assistant Collector also imposed a penalty of Rs. 2000/-on the appellants. Against this order the appellants preferred their appeal before the Collector, Central Excise (Appeals) New Delhi, who by the impugned order disagreed with the findings of the Assistant Collector regarding the confiscation of 30 Qtls. of khandsari sugar on the ground that confiscation was bad in law since sugar in respect of which duty liability has been discharged on the basis of evidence cannot be confiscated, but reduced the fine in lieu of confiscation from Rs. 5,000/- to Rs. 100/- in view of the facts and circumstances of the case. As regards the penalty and the demand of duty, the Collector, Central Excise (Appeals) refused to interfere.
3. I have heard Shri R.P. Bhatnagar, learned counsel for the appellants and Shri T.H.K. Ghauri, learned S.D.R. for the respondent.
4. Shri R.P. Bhatnagar, learned counsel for the appellants contended that in the show cause notice Rules 92A and 226 were quoted and since the said Rule 92A in Chapter V/C-I does not provide for imposition of a compounded duty the order demanding the duty was bad in law. In reply, Shri T.H.K. Ghauri, learned SDR submitted that all the facts constituting the contravention and the demand of compounded duty were mentioned in the show cause notice and therefore wrong mention of Section or Rule in the show cause notice would not render the demand of duty invalid. From the show cause notice I observe that all the facts constituting the contravention of the provisions and the demand of compounded duty as well as the grounds for imposing the penalty in the show cause notice. Thus, under these circumstances mere mention of Section 92E instead of 92C in the show cause notice does not affect the validity of the demand in question. It deserves to be mentioned here that no such plea was ever taken before the authorities below. It is significant that it is not the case of the appellants that the wrong mention of the Rule or Section in the show cause notice has caused any prejudice to them in their defence.
5. Shri R.P. Bhatnagar, learned counsel for the appellants further submitted that the demand of compounded duty of Rs. 6,893.00 for the 3rd week of January, 1982 was bad in law, inasmuch as, the appellants had only deposited about Rs. 4,000/- for the last week of January, 1982. He further vehemently contended that unless the actual amount of production of khandsari sugar as also the removal thereof from the premises by the appellants is determined no duty can be demanded, as according to him the quantum of khandsari sugar was not quantified. The authorities below have assumed that the appellants started the Centrifugal for the entire 3rd week of January, 1982. There is no warrant for such assumption. It is for the authorities to determine on facts as to what was the date on which the appellants commenced the production and what was their unauthorised production of khandsari sugar during the 3rd week of January, 1982. To substantiate his contention he cited the judgment rendered by the Hon'ble High Court of Allahabad in the case of M/s. B.K. Gupta Khandsari Sugar Mills v.U.O.I., 1983 ELT 889. A perusal of the said decision would show that the said decision applies to the present case on all fours. In that, similar argument was advanced. Agreeing with the said argument the case was remanded to determine the duty. The relevant portion may be extracted as below :- "As regards the argument of learned counsel for the petitioner that neither the Collector nor any of the higher authorities have factually determined the date from which the petitioner installed the additional centrifugal and the actual amount of Khandsari Sugar produced and removed from the premises. He contends that unless the actual amount of production of Khandsari sugar as also the amount of removal thereof from the premises by the assessee is determined, no duty can be demanded. As the quantum of Khandsari sugar cannot be quantified the authorities have assumed that the petitioner started the additional centrifugal from the commencement of the season.
There is no warrant for this assumption. It is for the authorities to determine on facts as to what was the date on which the petitioner commenced production and what was his unauthorised production of Khandsari sugar. The amount of duty will now, of course, have to be worked out on the standard rate, and the concessions available under the special procedure will not be available to the petitioner.
In the situation, we allow the writ petition and quash the orders of the Collector as well as the appellate and revisional orders in so far as duty has been demanded from the petitioner on the unauthorised centrifugal. We, however, send the matter back to the Collector. It will be open to the Collector to take fresh proceedings in accordance with law against the petitioner in respect of production of Khandsari sugar by unauthorised means." 6. The only other surviving condition of the learned counsel for the appellants that the penalty of Rs. 2000/- is excessive is only to be stated to be rejected if one looks to the facts and circumstances of the case and particularly in the absence of any extenuating circumstances for operating the Centrifugal after breaking open the official seal affixed on the Centrifugal.
7. In the light of the foregoing discussion confiscation of Khandsari sugar with an option to redeem the same on payment of a Redemption Fine of Rs. 100/- and the imposition of personal penalty of Rs. 2,000/-are upheld. That part of the order which relates to the demand of duty amounting to Rs. 6,893.00 for the 3rd week of January, 1982 is set aside and the case is remanded to the Assistant Collector of Central Excise & Customs, Moradabad to work out the actual amount of production of Khandsari sugar as also the amount of removal from the appellant's Factory during the 3rd week of January, 1982. The amount of duty will now, of course, have to be worked out on the standard rate and the concessions available under the special procedure will not be available to the appellants. The Assistant Collector will do so after giving full opportunity to the appellants.