Commissioner of Central Excise Vs. Siddhartha Tubes Ltd.

1. The Revenue has filed this Appeal against Order-in-Appeal No.351/2003 dated 31.3.03 by which the Commissioner (Appeals) has set aside the demand of duty and penalty imposed on M/s. Siddhartha Tubes Ltd. 2. Shri P.M. Rao, learned Departmental Representative, submitted that when the Central Excise Officer verified the finished products manufactured by the respondents on 4/5.12.98, they found shortage on 12492 pipes of various sizes weighing on 247.442 MT valued at Rs. 40,97,316; that the Additional Commissioner under Order-in-Original No.137/2001 dated 13.2.01 confirmed the demand of duty of Rs. 6,14,597 and imposed a penalty of equivalent amount under Section 11 AC of the Central Excise Act besides imposing another penalty of Rs. one lakh under Rule 173 Q read with Rule 92 of the Central Excise Rules, that however, on Appeal the Commissioner (Appeals) had allowed the Appeal observing that the physical verification was conducted on the basis of weighing the standard pipes and not carried out on the basis of the weight of each pipe; that the Commissioner (Appeals) also held that extended period of limitation is not invocable as no allegation for invoking the same had been mentioned in the show cause notice. The learned Departmental Representative, further, submitted that in the Panchnama, details have been filled in size-wise of pipes for MS Black Pipes and GI pipes separately; that the stock of standard pipes and assorted pipes have also been dealt with separately; that only to ascertain the weight of pipes found short, the same had been calculated on the same basis which had been adopted by the respondents for making entries in RG-I register; that the shortage of finished goods found during verification of stock by the officer is correct and the finding of the Commissioner (Appeals) that the shortage is within the tolerance limit is not correct; that there could be tolerance limit only in respect of weight and not in respect of quantity of pipes. Finally, he submitted that the extended period of limitation is invocable as the duty was demanded in the show cause notice on account of clandestine removal of the finished products which were not recorded in the RG-I register; that this clearly invokes the ingredients mentioned in the proviso to Section 11 A(l) of the Central Excise Act and it has been held by the Tribunal in the case of Siemens Ltd. v. CCE, 1994 (70) ELT 305 (Tri) that extended period of limitation is applicable when the goods have been clandestinely removed.

3. On the other hand, Shri Bipin Garg, learned Advocate, submitted that the Central Excise Officer had calculated the quantity on the basis of emperial formula which is used by them also for the purpose of statutory records; that however, at the time of removing the pipes to their customer the actual weight is recorded; that there could be difference on account of this reason in the weight of the pipes mentioned in the RG-I register as ascertained by the officer; that further, the officer had taken each pipe as standard pipe whereas assorted pipe may have various wall thickness and for this reason, the weight should have been calculated independently; that as per ISI specification the tolerance limit for various pipes is between plus minus 10%; that the shortage found in their case comes to only 5.57 percent which is within the tolerance limit. The learned Advocate also contended that no evidence has been brought on record by the Revenue to show that the pipes were removed clandestinely by them without payment of duty. Finally, he submitted that the show cause notice is barred by time limit as the verification was conducted on 5.12.98 whereas the show cause notice has been issued on 19.11.99 which is beyond the normal period of six months specified in Section 11 A(1) of the Act; that the larger period of limitation was not invoked in the show cause notice also.

4. We have considered the submissions of both the sides. The Revenue has contended that after verification of the stock in the factory premises of the respondents, details had been recorded in Panchnama sizewise separately. This has not been disputed by the Respondent. We agree with the learned Departmental Representative that tolerance limit can be prescribed only in respect of weight of any product and not in respect of actual numbers. The respondents have not controverted the submissions of the learned Departmental Representative that the pipes were found short in numbers also. In view of this, it cannot be claimed by them that there was no shortage of pipes at the time of physical verification of the stock vis-a-vis RG-I register. As the said stock was not found in the factory premises, it is but to be presumed that the same has been removed from the factory without payment of duty. In the case of clandestine removal, it is not always possible to bring on record the purchaser of the goods removed clandestinely. A perusal of the show cause notice also reveals that Shri V.K. Rathi, Commercial Officer and authorized Representative of the Respondent, was satisfied with the process of counting of stock. He has deposed in his statement dated 5.12.98 that they had not physically verified the goods in the factory since long time. Similarly, Shri Ganesh Verma and H.D. Verma of the respondents were also satisfied with the counting of stocks.

Nothing has been brought on record by the respondents to show that their representatives had retracted their statements or showed dissatisfaction with the process of stock verification. We are also of the view that extended period of limitation is invocable as it is clearly mentioned in the show cause notice that as the goods had been found short, there is clear indication that the same had been clandestinely removed without payment of duty. Once the allegation of clandestinely removed has been specifically mentioned in the show cause notice, it cannot be claimed by the Appellants that one of the ingredients mentioned in proviso to Section 11 A(1) of the Act has not been alleged in the show cause notice. In View of this, we uphold the demand of duty against the respondents as confirmed by the Adjudicating Authority. However, taking into consideration the facts and circumstances of the case, the interest of justice will be met if a penalty of Rs. one lakh only is imposed on them. We order accordingly.

The Appeal is disposed of in the above terms.