1. The appellants are engaged in the manufacture of fire works Based on information received, department's preventive party or 28.12.1997 intercepted one four wheeler carrying fire work total!) valued at Rs. 3,51,114/- and found the same being transported without cover of proper Central Excise duty paid documents. The truck alongwith the fire work was consequently seized by the department. In follow up action the appellants' factory premises as well as office were searched where incriminating private documents viz. 52 packing slips and one depot invoice concealed in isolated place of the office premises relating to clandestine removal of the goods for the period December 1996 to December 1997 were found. On the scrutiny it was found that these packing slips contained all the relevant details regarding, description, consignee name, vehicle No. etc. but the assesses was unable to produce the corresponding duty paying documents. The total value of fire work involved in these 52 packing slips was Rs. 1,14.61,197/- involving Central Excise duty of Rs.21,17,848/-.
2. Further during the course of physical stock taking of finished goods as on 29.12.1997 at the factory premises, shortages totally valued at Rs. 55,648/- involving Central Excise duty of Rs. 10,017/- were noticed by the preventive officers when the stock was compared with the stock shown in RG1 register. Again during the course of physical stock taking of duty paid finished goods conducted by the preventive officer on 29.12.1997 at the assessee's duty paid godown. shortages/excesses totally valued at Rs. 2,41,212/- involving Central Excise duty of Rs. 43,419/- were noticed when the stock available was compared with stock shown in the duty paid godown register maintained by the assessee.
3. During the course of further investigation and thorough scrutiny of the assessee's record, lorry delivery slips pertaining to the period from 03.04.1996 to 28.07.1997 were found involving fire works totally valued at Rs. 15,06,680/- and Central Excise duty of Rs. 3,01,336/-.
These lorry receipt were also not accompanied by any duty paying documents and the goods were not account in RG-1 register.
4. In view of above detection a show cause notice was issued to the appellants asking them why duty amounting to Rs. 24,72,620/- should not be demanded and confirmed and why 4610 bundles of fireworks under seizure should not be confiscated and penalty should not be imposed on the appellants under Section 11AC, Rule 173Q read with 209A and also demanded interest under Section 11AB. The matter was finally adjudicated by the Commissioner who confirmed the entire duty demand, confiscated the seized goods and the truck and imposed penalty of equivalent amount under Section 11AC on the appellants' company and a penalty of Rs. 25,000/- under Rule 173Q and also imposed a penalty of Rs. 1 Lakh on its partner.
5. The learned advocate for the appellants submitted that in so far as the seized goods are concerned they are not seriously contesting the issue though they maintain that the goods were duty paid and duly accounted for in the income tax/sales tax return.
6. So far as demand of duty amounting to Rs. 21,17,848/- based on the packing slips recovered from the appellants' premises is concerned it is their plea that no goods relating these packing slips were ever despatched as the order relating to these packing slips were subsequently cancelled and as per the practice of the appellants the packing slips are prepared in advance and sent to duty paid godown for sorting out the fire works and that some of the packing slips were scored off by drawing a line across them and therefore demand of duty on the basis of these packing slip was totally incorrect. The department has not made any enquiry from the consignee regarding receipt of the goods nor from the transporter, regarding despatch of the goods nor made any enquiries regarding procurement of raw material and consequent production of the goods. They have submitted statements from the 50 consignees who have denied receipt of any goods under these packing slip and have offered them for cross examination by the adjudicating authority. The Commissioner however, has not stated anything about these statements in his order in-original nor has cross examined these consignees. The clandestine removal has only for presumed without any iota of evidence. The advocate however conceded that the duty involved on these consignment was immediately paid by the partner of the firm Shri Vishan Shamlal Milwani who has also admitted that the goods were removed without duty paying documents and this statement of the partner has not been retracted till date. He, however, submitted that clandestine removal cannot be held against them merely on the basis of statement of the partner unless it is corroborated by some other evidence like receipt of goods by the consignees, transport of material by the transporter and cited certain C.E.S.T.A.T. decisions reported at 2004 (178) E.L.T. 792 (Tri.-Del.) in the case of Jagatpal Prem Chand Ltd. v. C.C.E., Delhi-I in the case of Arora Products v. Commissioner of C. Ex., Jaipur 2002 (150) E.L.T. 801 (Tri.-Mumbai) in the case of C.C.E Ahmedabad v. Vivek Dyechem Industries Pvt. Ltd. 7. As far as shortages in finished goods stock involving duty of Ps.
10,017/- is concerned the appellants did not dispute the same.
Similarly in respect of the shortages/excesses in duty paid godown involving duty of Rs. 43,419/- the appellants did not seriously dispute the liability but maintained that these were more on account of error in maintaining the stock account rather than clandestine removal.
8. As regards the clandestine clearance of excisable goods on the strength of lorry delivery slips involving duty amounting to Rs. 3,01,336/- it was submitted that these delivery slip do not bear the acknowledgement of the consignee in token of having received the goods.
There is no statement of the respective consignee admitting the receipt of the goods and the mode of payment made in respect of the goods covered by the slips.
9. In the last it was submitted that department has not brought on record any evidence to establish the availability of either raw material or labour to the extent of alleged manufacture and clandestine clearance of the goods. They did not have the capacity to manufacture the entire goods stated to have been clandestinely removed that their manufacture of fireworks is governed under the Explosive Act and so the production cannot be concealed and that they cannot work during night as electricity is not used in the premises as the heat generated by electricity can cause explosion. Their average annual value of clearance works out of Rs. 1,78,65,317/- and on a average production of Rs. 178.65.317/- the raw material consumption would be Rs. 1,28,80,524/-. Therefore, it was not possible for them to remove calendestinely finished goods valued at Rs. 1.36 crores from the factory premises.
10. As regards penalty it was submitted that penalty under Section 11AC is not mandatory as has been held in a number of decisions and since no clandestine clearances have been effected the penalty is not imposable at all.
11. The learned S.D.R. submits that the appellants have admitted clandestine removal in respect of the goods loaded on the truck intercepted by the preventive officers involving duty of Rs. 34,308/- and their plea that the goods were loaded from duty paid godown is not correct as the driver in his statement has clearly stated that the goods are loaded from the factory premises. They have failed to produce any duly paying documents in this regard. Similarly they have not contested the shortages in the finished goods stock involving duty of Rs. 10,017/- and shortages in duty paid godown involving duty of Rs. 12. As regards the packing slips it was submitted that these packing slips were signed by the partner of the firm and contain all details regarding Order No., date, consignee's name, case No., Number of packets, price of goods, and signature of packer. These goods cannot therefore be said so have not been delivered as they have been unable to show any rejection letter from the customers. Besides the partner of the firm has clearly admitted in his statement that goods corresponding to these packing slips were removed without payment of duty and this statement has not been retracted so far. The payment was not made under protest and statements were recorded in December 1997 as well as June 1998 and at no time it was stated that the statements were recorded under coerain or the duty was paid under protest. A show cause notice was issued in June 1998 and the reply was submitted after about year of the show cause notice. In between this period also there was no communication from the appellants whatsoever stating that they were not liable to pay duty as these goods were never supplied. Such a clear cut admission and immediate payment of duty without any protest establishes the guilt and no further enquiry was needed from the consignees etc.
The packing slips indicate the Vehicle No. also and therefore the goods have to be presumed as having been delivered. Further, the goods relating to the packing slips were not available in the factory and also not in godown and (this fact has not been controverted by the appellants in their appeal. It was accordingly submitted that there was no flaw in the Commissioner's order demanding duty in respect of goods relating to these packing slips.
13. As regards lorry receipts the statement of the partner to this effect was recorded in June 1998 i.e. after six months of the seizure and here also the partner clearly admitted that the goods have been removed without payment of duty and this statement also has not been retracted so far. The lorry receipts in most of the cases bear the signature of the consignee and therefore there is no doubt left that these goods were not despatched. As regards the other submissions regarding capacity of production, No. of worker etc. it was submitted that the production and capacity has been worked out on the basis of RT 12 return which will only show the recorded production and not unrecorded production and therefore no inference can be drawn from this.
14. We have considered the submissions of the both sides. We find that this is one case where the appellants have admitted clandestine removal of goods without any reservation in their statement which have not been retracted till date. The duty was paid immediately on detection without any word of protest and even though another statement was recorded in June 1998, no protest letter was lodged. The reply to the show cause notice was submitted for fall one year and in between also the appellants never took a plea that the goods were never removed and that the orders relating to them were cancelled. Even in their reply to the show cause notice or in the ground of appeals they have not stated that the statement given by the partner was under coerain or force or that they were incorrect. As rightly pointed out by the learned D.R.capacity of production, when no machines are involved cannot be determined and the appellants refrence to the number of worker and the value of production is with regard to the recorded production from which it cannot be inferred that no extra production could have been undertaken as in that case the raw material will also not be accounted for. The plea regarding cancellation of order could have easily been taken during the course of investigation when statements were recorded and the matter could have been verified. The Commissioner in his finding has stated that the goods corresponding to the packing slip and lorry receipt were not found either in factory premises or the duty paid godown and the appellants have not taken any objection to the same in their written submission. Besides, we find that the conduct of the appellants has been fraudulent in as much as in respect of shortages in the finished stock and the duty paid godown the matter has not been contested. There is a clear cut case of removal without payment of duty detected by the officers when a full truck load of fireworks were intercepted without any duty paying documents and the appellants have failed to produce any duty paying documents relating to them till today. We, therefore, hold that the findings given by the Commissioner are fully supported by the statement of the partner and there fraudulent conduct. The packing slips were duly signed by the partner and contain all details including vehicle number and therefore they were more in the nature of delivery slip rather than the packing slips.
Similarly lorry receipt bear signature in most cases of the consignee in token of having receive the goods and also admitted by the partner in his statement. The demand of duty and confiscation of goods is therefore upheld and so is the redemption fine imposed. The case law cited are not very relevant as in case of clandestine removal all facts cannot be similar and each case has to be judged on its own merits.
15. As regards the mandatory penalty under Section 11AC, we hold that the penalty is the maximum penalty provided and not equivalent penalty and we are inclined to reduce this penalty to Rs. 5 Lakhs only.
16. As regards the second appeal regarding penalty on the partner since the partner was actively involved in the removal of the goods, we find no justification to interfere with the penalty imposed on him which in our view is reasonable.