Judgment:
1. Heard both sides. The present appeal is against an order of Commissioner who has imposed a fine of Rs. 41,97,000/- in lieu of confiscation of "G.P. Steel colour coated sheets," seized from the premises of the appellants the matter was earlier remanded Vide this Tribunal order No. C1/2193-97/WZB/99 dated 26/5/99 directing the Commissioner to examine the appellants contention that there was an all Industry's practice of recording production in RG1 register only at the time of clearance and there after determine the matter.
2. The appellants is a Public limited company engaged in the manufacture of aluminium plates, plains sheets, G.P. Colour coated steel G.P. coil etc; & holds Central Excise License since July, 1993.
The main raw materials used by the appellants in its plant are aluminium sheets/coil, G.P. steel sheets/coils, paint and chemicals including isocyanate and polyols. The aluminium sheets/coil and G.P. steel/coil are first cleaned with chemicals and thereafter colour coated coils are inspected by the quality control department graded depending upon the finish achieved. Such colour coated coils are either cleared on payment of duty after being finally packed and weighed or are capitvely consumed in the plant by transferring the same to either of the following two lines: (b) Profiling line. i.e. Trapezoidal sheet line in cut-to-length line, the colour coated coil is, cut into sheets or required length and/or width, as per customer's requirements or the requirements desired for producing sandwich panels. The cut to length colour coated sheets are either cleared on payment of duty after quality control checks, final packing and weighment or are used capitvely for manufacturing sandwich panels.
In the profiling line, colour coated coil are further processed for making tralpezoidal sheets. After shaping the product through forming with the help of Forming tools, the process of cutting is carried out. Such trapezoidal sheets are either cleared on payment of duty after inspection, final packing and weighment or the same are used capitvely in the plant for further manufacture of sandwich panels. The cut to length sheets, and trapezoidal sheets which are the final products of the cut to length line and profiling line are raw materials for manufacturing sandwich panels and prefabricated doors and frames. Appellants manufacture different types of sandwich panels, doors and frames using difference combination of trapezoidal sheets on either side with polyurethane foam in between. Such sandwich panels or prefabricated building panel doors and frames and cleared from the factory only on payment of duty. Here to annexed and marked is a flow chart detailing the manufacturing process carried out by the appellants in their factory. Such coated coil which are used for manufacturer of Tapezodial sheets of building panels in the factory were found to be not accounted for in the records, when the officer visited the factory. The appellants contention that there was all industry practice which being followed to make the entries in the RG1 register at the time of dispatch of the goods after weighment. They had also sought and were granted permission in July, 95. To weigh the goods outside the factory as their own weigh bridge was not functioning they had also been granted the permission under Section 65 of the Customs Act for the entire factory premises to be a bonded area. The alleged unaccounted coils were detected consequent to a visit of Anti Evasion Directorate officer on April 22, 1996 on the grounds allowed that the said coils which were lying in packed condition but were not accounted for in the RG1 register.
3. Consequent to the enquiry made a show cause Notice was issued on 1/-12-96 for- (i) contravention of the provision of Rule 53 and Rule 173Q of the Rules, in as much as the appellants had failed maintain the statutory records and that the goods manufactured were not entered in RG 1 register; (ii) that on due verification of various records, and comparing the figures of productions as shown in the I production records as also in Form 3CD submitted to the Income Tax Department at the end of each financial year commencing from 1993-94, there appeared to be shortage in stock of manufactured products to the extent of 1075.822 MT and taking the said quantity as clandestinely removed, the appellants had evaded duty amount to the extent of Rs. 88,99,987/-.
(iii) that on verification of production records as also the scrap as shown as generated in the process of production, and it was taken that the finished goods were removed in the guise of scrap and because there was no duty difference for finished goods, and scrap, there was no duty evasion, however, there was an element of under-valuation and the goods in the guise of that being scrap, were undervalued and thus duty amounting to Rs. 36,89,419/- was evaded.
4.1 Commissioner of Central Excise Pune, vide order No. 11/98 dated 23.3.98 confirmed demand of Rs. 86,99,087/- in respect of 1075.822 MT on colour coated product alleged to be clandestinely removed between the period of 92 to 93 and 22/4/96 the demand of duty of Rs. 36,89,419/- for removal of Aluminium finished products etc. as scrap during the period 92-93 to 9/5/1996 and from 1/4/1996 to 24.4.1996 was confirmed. The Commissioner also ordered confiscation of the said GP colour coated products seized & valued at Rs. 41,97,000/- which were fully manufactured and unaccounted in the RG1 register. The order of confiscation of plant and machinery has an option to redeem the same on payment of fine of Rs. 20,00,000/- along with the penalty of Rs. 1,23,88,506/-under Section 11AC read with Rule 173Q(1) was order.
4.2 The Tribunal set aside the demands as mentioned above and in so far as the confiscation of the goods was concerned, remanded the matter back to the adjudicating authority for taking a fresh look in the matter after considering the trade practice prevailing in the Industry.
4.3 Department filed a Civil Appeal against the order of the Tribunal which was dismissed by the Honourable Supreme court vide its order dated 25.9.2000. The department there after filed an application rectification in the Tribunal, which was dismissed, vide order No.C/II289/02WZB dated 30.1.2002.
4.4 There after the Commissioner heard the appellants and the order dated 3-3-2005 was passed confirming the confiscation of the "G.B.Steel colour coated products" seized in the factory premises for not having been entered in the RG1. The confiscation liabilities was arrived under Rule 173Q(1) with an option to redeem the same on a fine of Rs. 4,17,000. Hence this appeal.
5.1 The law on confiscation of goods, found in the factory and not entered in RG-1 production record is well settled. From the following decisions of the Bombay & Andhra Pradesh High Courts & of this Tribunal.
It is very clear that non-entry of the productive in the RG-1 will not bring in the liability come under the In the present case the charges of alleged clandestine removals has not upheld by the Tribunal. The Civil Appeal filed against this findings of the Tribunal has been dismissed by the Supreme Court We would find that in the facts of this case the simple not entered in the RG1 charge cannot bring confiscation liability on goods still in the factory. We also rely upon the decision in the case of M/s. Koch Raie Industries Pvt. Ltd. 2006 (193) ELT 566 particularly in view of the fact that no material was shown to us to show that the RG 1 Stage was declared or specified by a Public Notice at a time after the goods come into existence within the factory premises. In this view of the matter we would set aside the order of confiscation and the redemption fine and allow this appeal.
5.2 The remand earlier was ordered essentially to enable the Commissioner to record his findings on plea that non recording of production in the RG1 register was in line with the Steel Industry's practice of recording such production just prior to the removal, particularly when goods were both a final product as well as an intermediate product. Even though appellant led evidence was led before the Commissioner to prove the existence of such a practice in the Steel Industry, no specific finding disputing the existence of the said industry practice has been recorded by the Commissioner, even though the Tribunal had, while remanding the matter back to him specifically directed him to go into this aspect of the matter and then decide the case. Except for finding faults with the language of the affidavits produced, Commission has made no efforts to ascertain the existence of such practice by making reference to the Commissioner having jurisdiction over the factories of various Steel Mills whose former employees had given affidavits about the existence of the such practice. Therefore, the submission that the impugned order passed by the Commissioner did not follow the direction given to him in the remand order passed by the Tribunal, has to be upheld and order therefore liable to be set aside only on this ground has to be upheld.5.2(b) Reliance in this regard was also placed on the decision of the Supreme Court in the case of Amrit Foods v. Commissioner of Central Excise 2005 (190) ELT 433 where in the Supreme Court held in para 5 as follows: The Revenue has preferred an appeal from the order of the Tribunal setting aside the imposition of penalty under Rule 173Q of the Central Excise Rules, 1944. The Tribunal has set aside the order of the commissioner on the ground that neither the Show Cause Notice nor the order of the Commissioner specified which particular clause of Rule 173Q had been allegedly contravened by the appellant. We are of the view that the finding of the Tribunal is correct. Rule 173Q contains six clauses the contents of which are not same. It was, therefore, necessary for the assessee to be put on notice as to the exact nature of contravention for which the assessee was exact nature of contravention for which the assessee was liable under the provisions of the 173Q. This not having been done the Tribunal's finding cannot be faulted. The appeal is, accordingly, dismissed with no order as to costs.
By the appellants, It was submitted that the issue in hand is no longer re Integra, in view of the decision of this Tribunal in the case of Bhilai Conductors v. CCE 2001 (125) ELT 781 wherein it has been held that goods which were seized within the factory premises could not be confiscated under Rule 173Q unless and until such non accountal was with an intention to evade payment of duty. It was submitted that in the present case, appellant had demonstrated before the Commissioner that the seized goods were manufactured from accounted for raw materials therefore the non recording of the production in the RG1 register was not with an intent to evade payment of duty. The Commissioner has not recorded any finding of intent to evade payment of duty and has refrained from imposing a penalty The, order of confiscation is therefore clearly unsustainable in law.
5.4(c) It was submitted that the impugned order of the Commissioner proceeded on an erroneous interpretation of the expression 'account for' as appearing in Sub-rule (b) of Rule 173Q. A reading of the impugned order, particularly para 15 and 20 makes it evidently clear that the Commissioner has equated the said expression 'account for' as referring to "recording of production" in the RG1 register. The said expression was actually synonymous with "explaining" or "answerable".
Reliance in this regard was placed upon the decision of the Tribunal in the cases of Pepsi Foods v. CCE and Nilesh Textile Pvt. Ltd. 2003 (162) ELT 553. In particular, attention was invited to the following observation of the Tribunal in the case of CCE v. Continental Chemicals which decision has been followed subsequently in the remaining two cases cited above.
The ground in the appeal is that the provisions of Rule 173Q would be attracted for the reason that the goods were are not accounted for in the R.G.1 register. Clause (b) of Rule 173Q refers to "a manufacturer or producer, registered person of a warehouse or a registered dealer who does not account for excisable goods manufactured, produced or stored by him". It is not possible to agree that this clause takes into its scope goods, which are physically, present but details of which are not entered in the accounts maintained by the manufacturer. The phrase "accounting for" is not synonymous with the phrase "entered in the account".
Accounting for anything means being answerable for or explaining a particular course of conduct. A person thus maybe asked to account for his failure to do a particular act that he was required to do.
In the context of the rule, it is clear that the expression is used in such a manner as to cast a burden on the manufacturer or other person concerned to show the existence of the goods that he has manufactured or received, or to offer a valid explanation for their absence. Acceptance of the meaning attributed to it by the Commissioner would then necessarily lead to the conclusion that there are two provision in the rules for dealing with the same contravention, Rule 173Q and Rule 226. The latter rule provides for confiscation of goods that are not entered in the account to be maintained by a manufacturer. It is rule that in fact should have been applied and had it been cited in the show cause notice, I would have upheld the confiscation. However, the show cause notice does not propose confiscation under Rule 226. It does not even cite it.
In these circumstances, I am unable to interfere with the order of the Commissioner (Appeals).
It was submitted that in the present case, there was no finding by the Commissioner that the appellant had not been able to explain the presence of the finished goods in the factory. In fact, the Show Cause Notice itself accepts that the production of the seized goods was accounted for in the private production records. The fact that these goods had been manufactured from accounted for raw material is also not disputed in the impugned order. The other allegation in the Show Cause Notice that there had been clandestine removal of goods in the past had been set aside by the Tribunal in its final order dated 26-8-1999. The said order of the Tribunal was confirmed by the Supreme Court as the Civil Appeal filed by the department against the said order was dismissed by the Supreme Court vide its judgment dated 25.9.2000. It was therefore submitted that since the allegation regarding clandestine removal of goods in the past has been set aside by the Supreme Court finally, there was no basis left for the department to allege malafides or any intention to evade payment of duty against the appellant. This is the reason why the Commissioner himself had not chosen to impose any penalty, even though he had ordered confiscation and imposed redemption fine. As such, even if the appellant's submission regarding existing the Industry Practice was rejected, the present case was only one of improper maintenance of the RG1 register as a result of non entering of the production therein which could, at the highest, have attracted the provisions of Rule 226 and not Rule 173Q. We find force in this submission 5.3(a) The Ld Dr. Submits the judgment of the Supreme Court in the case of Amrit Foods v. CCE was per incuriam as it had not taken into account the earlier judgment of the Supreme Court in the case of State of Bihar v. Kalika Singh 2003 (1) SCW 2458, CCE v. Pradyumna Steels Ltd. 1996 (82) 441 and N.B. Sanjana v. the Elphinston Spng. & Wavg Mills Co. Ltd. 1978 ELT J399, wherein the Supreme Court had observed that the mere mention of a wrong provision of law when a power exercised was available under a different provision was by itself not sufficient to invalidate exercise of that power. Reliance was also placed in this regard on the decision of the Tribunal in the case of Kasinka Trading v. CCE (b) As regards the submission that goods lying within the factory premises could not be confiscated under Rule 173Q the Ld. D.R. referred to the judgment of the Andhra Pradesh High Court in the case of Nizam Sugar Factory Ltd. CCE 1987 (27) ELT 40 and that of the Bombay High Court in the case of Kirloskar Brother Ltd. 1988 (34) ELT 30. The DR submitted that goods which were not accounted for could be confiscated without material on mens rea. In support of this proposition, he also referred to the judgment of the Supreme Court in the case of Gujarat Travancore Agency v. Commissioner of Income Tax (c) On the issue of interpretation of the expression 'account for', as appearing in Rule 173Q(1)(b), the Ld D.R. referred to the decision , of the Tribunal in the case of K-Three Electronics Pvt. Ltd. v. CCE 2004 (113) ELT 432, Carona Cosmetic Chemicals Pvt. Ltd. 1991 (55) ELT 118 and HGI Automotive Pvt. Ltd. v. CCE He also pointed out that the decision of the Tribunal in the case of Pepsi Food which has been relied upon by the appellant had been challenged by the department before the High Court and the High Court had directed a reference to be made to it. As such, in his view, the said decision of the Tribunal in Pepsi foods was in jeopardy and therefore could not be relied upon.
5.4(a) We find that the judgment of the Supreme Court in Amrit Foods Ltd. was not at variance with the earlier judgments relied upon the Ld.
D.R. The decisions which had been referred to by the Ld D.R. cases where an incorrect provision of law had been cited in the show cause notice for demanding duty from an assessee. These decisions do not relate to penal proceedings or penal provisions which are required to be strictly construed. Reliance in this regard is well placed on the judgment of the Supreme Court in the case of CCE v. Orient Fabrics wherein Supreme Court in paras 6 and 19 held as 6. A perusal of the said provision shows that the breach of the provision of the Act has not been made penal or an offence and no power has been given to confiscate the goods. It only provides for application of the procedural provisions of the Central Excises and Salt Act, 1944 and the rules made thereunder. It is no longer res integra that when the breach of the provision of the Act is penal in nature or a penalty is imposed by way of additional tax, the constitutional mandate requires a clear authority tax, the constitutional mandates requires a clear authority of law for imposition for the same. Article 265 of the Constitution provides that no tax shall be levied or collected except by authority of law.
The authority has to be specific and explicit and expressly provided. The Act created liability for additional duty for excise, but created no liability for any penalty. That being so, the confiscated proceeding against the respondents were unwarranted and without authority of law.
19. It is now a well settled principle of law that expropriatory legislation must be strictly construed (see M/s. D.L.F. Qutab Enclave Complex Educational Charitable Trust v. State of Haryana and Ors.
The decision of the Supreme Court in Amrit Foods was in relation to penal proceedings under Rule 173Q, the same is binding on this Tribunal and cannot be brushed aside as having been rendered per incuriam.Kasinka Trading v. Collector of Customs, wherein it was held that non mention of a specific clause of a penal provision in the order of adjudicating authority does not vitiate the order, is no longer a good law in view of Supreme Court's decision in the case of Amrit Food. Also, the said decision of the Tribunal seems to have been rendered without considering the judgment of the Madras High Court in the case of B. Lakshmichand, 1983 ELT 322, wherein the court held that non mention of particular clause of Section 1 of the Customs Act vitiated the Show cause notice.
(c) As regards the revenue's contention that the decision of the Tribunal in the case of Bhilai Conductors was contrary to the judgment of the Andhra Pradesh High Court in Nizam Sugars' case and that of the Bombay High Court in the case of Kirloskar Brothers Ltd. it was pointed out that para 15 of the judgment Andhra Pradesh High Court in fact negated the submission of the Ld. D.R. as it made it clear that some of the clause in Rule 173Q(1) required 'intent to evade payment of duty' to be proved while others did not. Both the cases, which went to the High Court, intention to evade payment of duty was manifest as there was an intent to super loaded on trucks without valid duty paying documents and issue of gate pass where in Kirloskar Brother case, Air Conditioner was removed after manufacture without a licence the case cannot be compared with there in. Instances in both the cases to prove clandestine removal of the goods in the past was material Likewise, other decisions of the Tribunal which have been referred to by the Ld DR were also of a similar nature, where intention to evade payment of duty could be manifest on record as there were past instances of clandestine removal which led the drawl of an adverse inference against the assessees with regard to unaccounted stock seized within the factory premises. In this case, the charge of clandestine removal for the past period had been entirely set aside by the Tribunal and that order had been confirmed by the Supreme Court. As such, there was no basis left for the department to draw an adverse inference against the appellant.
(c) Further the decisions of the Tribunal in the case of Carona Cosmetics relied upon by Revenue were no longer good law as they have been rendered prior to Bhilai Conductors decision.
(d) The decision of the Tribunal in the case of HGI Automotives (P) Ltd. also does not support the Revenue's case in as much as the learned single member who passed the said order observed in para 4 that if the goods found in excess were accounted for in the private records, the order of confiscation would not have been sustainable. In the present case, the private records of the appellants did not reflect production of the seized goods is not an issue.
(f) With regard the submission of the Ld D.R. that the line of decisions referred to in Pepsi Foods case were not required to be followed merely because an appeal or reference against the said order was pending in the High Court. This cannot be accepted unless such an order is set aside or stayed by a competent Court, it remains in full force & has to be followed.
(g) As regards the Supreme Court's judgment in the case of Gujarat Travacore v. CIT it is seen that the said judgment of the Supreme Court in fact supports the appellant's point of view. As therein it is held that "in absence of any indication in the language of the statute of the need to establish mens rea, penalty could be imposed for the mere default in complying with the statute." In this regard, it was submitted that since the appellant had complied with the provisions of Sub-section (b) of Rule 173Q(1) by accounting for the seized goods, the only other provision of Rule 173Q(1) under which confiscation could have been ordered was Clause (d) which expressly required "intention to evade payment of duty" to be proved. Hence, going by the ratio laid down by the Supreme Court in the aforesaid judgment, no confiscation could be ordered under Clause (d) of Rule 173Q(1) without proving intention to evade payment of duty.