Judgment:
1. This is an appeal against the order of Collector of Central Excise, Meerut.
2. The learned counsel stated, that having commenced production only on 22-10-1984, the appellants and the employees of the company were inexperienced in maintaining Excise records at the relevant time.
3. They were being guided by the Excise Officers incharge, specially in regard to the format of Excise records to be maintained such as R.G.register etc.
4. Throughout the material time, the dutiable product manufactured by the appellants was "branded" chewing tobacco (Quiwam), falling under Tariff Item 4-II(5) and with Notification No. 34/79-CE., dated 1-3-1979 (as amended) was applicable. The unit was under "physical control" i.e.
subject to 100% checks. And removal of goods could take place only after physical check not only of the product, but also of the day to day records maintained for the purpose.
5. Throughout the material time, the Excise authorities in-charge of the factory were aware that the records were being maintained in R.G. 1 form (and not R.G. 12) and had acquiesced in it. They were also aware of the fact that the branded chewing tobacco packed in containers and cartons ready for delivery to the wholesale dealers was never physically stored in the "bonded store room" but kept only in the finishing room and removed directly therefrom on payment of duty.
Similarly the stocks shown as "opening balance" on any day were also not physically stored in the bonded store room but were allowed to remain in the finishing room pending clearance on that day upon payment of duty and on completion of other Excise formalities.
6. On 25-2-1985 when Excise checking was done leading to the registration of the case, 15,000 pieces of Quiwam packed in glass phials, duly branded/labelled, was the opening balance and duly entered in the RG1 register. The correctness of this entry had in fact been verified with reference to the private records of production maintained by the factory, and accepted by the Collector in the adjudication proceedings, as clearly set out in the formal order passed.
7. The Collector had also verified all the relevant facts including those briefly mentioned above. Nevertheless, he had chosen to confiscate the entire stock of 30,445 pieces of glass phials of 50 gms each found in the finishing room. In lieu of such confiscation, he had given the appellants the option to pay a fine in lieu of confiscation of Rs. 60,000/- which was paid and the entire stock so confiscated was cleared only on payment of full duty leviable thereon. In addition, the Collector imposed the maximum penalty of Rs. 2,000/- permissible under Rule 226 of the CER being the only provision under which the penalty could be imposed.
8. In the light of the above submissions, it was urged that the impugned goods were not liable for confiscation under Rule 226 because the said provision authorises confiscation only of "goods of which due entry" has not been made and the provision also takes note of the fact that the required particulars of the goods manufactured had to be entered "within the time prescribed in the relevant rule".
9. In this case, out of the total quantity of 30,445 pieces due entry as "opening balance" had been made of 15,000 pieces in the RG1 Register which had been verified as correct, after accepting the explanation of the appellants in regard to maintenance of the register in RG1 form and non-storage in the bonded store room and retention in the finishing room. Thus the 15,000 pcs duly entered as "opening balance" in the register could not be confiscated under Rule 226.
10. As for the balance of 15,445 pieces found in the finishing room, which were seized and confiscated these admittedly were in different stages of labelling and packing necessary for marketing the produced under brand name :- (i) Labelling of glass phials filled with Quiwam, packing them for retail sale in cartons containing 10 such phials and labelling such cartons; (ii) Further packing such retail cartons in larger ones and labelling them for final removal as wholesale packs. The entry of these 15,445 was therefore required to be made only after the close of the working day on 25-2-1985 (but within 6 hours of commencement of work on the following day i.e. 26-2-1985). The checking and seizure of the impugned goods was made in the mid-day (between 2 & 4 p.m.) on 25-2-1985 when the making of any entry in respect of them was not due within the meaning of Rule 226. Thus confiscation of the balance of 15,445 pieces was also illegal.
11. Even otherwise the fine imposed in lieu of confiscation is far too excessive. The maximum penalty of Rs. 2000/- apart from being not warranted, is inconsistent with the reasoning set out in the adjudication order of the Collector leading to the conclusion that the lapses if any were of the technical nature, and had in fact been acquiesced in by the Excise Authorities instead of taking corrective action at the earliest opportunity.
12. The learned DR stated that from a perusal of the impugned adjudication order it will be seen that the adjudicating authority had dealt with all the aspects of the case and the submissions made by the appellant before him and has given his considered findings on each allegation/issue and thereafter passed a reasoned order. The party has also clearly admitted that they were not storing the goods in the bonded store room before clearance and were clearing the goods without bringing them in the bonded store room and without accounting for in the relevant column of RG12 Register. Therefore, the order passed by the Collector deserves to be upheld. Further he has already taken a lenient view while imposing the redemption fine and penalty.
13. A point was raised that out of 30,445 bottles ordered to be confiscated, 15,000 pieces were already shown as opening balance in the RG-1 register and therefore these were duly entered in the prescribed register. In this connection, it is submitted that though these 15,000 pieces were entered as opening balance in RG1 Register, but since these had not been cleared by the party as contended by them and as accepted by Collector as well, in that case these should have been found in the room whereas these were actually found lying somewhere else and a nil closing balance had been shown in RG1 Register. Therefore, these 15,000 pieces as well as remaining pieces i.e. (30,445-15,000) i.e. 15,445 pieces of glass phials each containing 50 gms of Rajratan Quiwam which were lying as finished excisable goods, but had not been accounted for in the prescribed records, were liable to confiscation.
15. In this case, admittedly the production record was being maintained albeit in form RG1 instead of RG 12(A) (as required). Further this practice was followed from 22-10-1984 to 25-8-1985 and the records continued to be so maintained without the mistake having been detected by either the appellants or the visiting officers. The commodity was under physical control and the clearance was required to be physically supervised by an officer who was expected to check these records and the entries therein undoubtedly the goods are required to be properly stored in the approved premises and accounted for properly, in the prescribed records. However, when the mistake is that of both the sides and is more that of 'form' than substance it could only be considered as a technical lapse.
16. We take particular note of the fact that the Collector has himself observed that "fact of clandestine removal has not been proved"; And further that "15000 bottles were in fact still lying in the finishing room and had not been removed"; And still further that "as regards 5206 bottles, defence, through detailed statement, has succeeded in establishing that there was no removal as such". "The fact that these irregular practice was in the knowledge of the departmental officers to some extent mitigated the gravity of the offence..." 17. In view of the above findings of the Collector, the technical nature of the offence and the plausible explanation given by the appellant, we feel that the right course for the Collector was to simply get the mistakes rectified and caution all concerned; And there was no cause for confiscation of goods (and consequential imposition of fine) or imposition of penalty on the appellants.