Full Judgment
The General Manager of the unit had admitted on 14-3-1990 that the part consignment was transferred to their second unit at Gurgaon on different dates against internal challans and no credit was reversed or adjusted in their RG-23A Pt. II at Mayapuri Unit. The consultant at the time of personal hearing also admitted that they had stopped production of 'Compasses' in their Mayapuri factory about two years ago. He could not produce any correspondence to show that they had informed the jurisdiction-al Central Excise office about the stoppage of production of compasses in Mayapuri Factory. Since the party had suppressed the fact of having transferred/disposed of the inputs without discharging duty liability or making reversal of credit entry in the RG-23A, Pt. II the extended period of 5 years under proviso to Section 11A of the Act for raising the demand has been correctly applied in this case. The demand is liable for confirmation. The party is also liable for penal action for contravention of Rule 57-F[i][ii]. The Addl. Collector therefore ordered, I hereby confirm the demand amounting to Rs. 25,993/- under Rule 57-1 read with proviso to Section 11-A of Central Excises & Salt Act, 1944. I also impose a personal penalty of Rs. 25,000/- (Rupees Twenty Five thousand only) under Rule 173Q of Central Excise Rules, 1944." 2. Briefly stated the facts of the case are that the appellant imported 70 kgs of Silicon Fluid valued at Rs. 1,87,029.75 under Bill of Entry for home consumption and paid CVD of Rs. 42,811.75. Out of the total quantity of 70 Kgs imported by the appellant on which credit of CVD under Modvat facilities was availed in RG-23-A Pt.II, 42.500 kgs of Silicon Fluid involving Modvat credit of Rs. 25,993/- was transferred to another unit without reversing the Modvat credit already taken and availed in RG-23A Pt. II. Thus the appellant contravened the provisions of Rule 57F(1)(ii) of Central Excise Rules, 1944. Accordingly, a show cause notice was issued to the appellant demanding duty amounting to Rs. 25,993/- by extending the period of demand beyond six months and also asking them as to why penalty should not be imposed on them.
3. When the case was taken up though there was a request for considering the case on merits, Sh. J.C. Khanna, Chief Executive of the appellant company appeared and requested to decide the case on merits.
Revenue was represented by Shri B.D. Bhagat, the Id. JDR, In the grounds of appeal the appellant admitted that 42.500 kgs of Silicon Fluid was transferred by the appellant from its Mayapuri Unit to its Gurgaon Unit; that this quantity was accounted for by the Gurgaon Unit of the appellant. However, Modvat credit of duty paid on the said quantity of Silicon Fluid was not taken by the Gurgaon Unit as no duty paying documents were issued by the Mayapuri Unit in respect of the said quantity of Silicon Fluid transferred by the Mayapuri Unit; that there was no loss of Revenue as this quantity of Silicon Fluid was used as an input for the manufacture of finished goods by the Gurgaon Unit.
It was pleaded that as there has been no loss of revenue to the Government there was no question of raising the demand by extending the period beyond six months; that if Mayapuri Unit is required to pay back the amount of Modvat credit availed on 42.500 kgs of Silicon Fluid then Gurgaon Unit could become entitled to take Modvat credit of the same amount in terms of Rule 57-E. It has been contended in the grounds of appeal by the appellant that proviso to Section 11-A can be invoked only in case of non-levy or non-payment or short-levy or short payment or erroneous refund; that in the present case there has been no short-payment of duty as the Gurgaon Unit of the appellant did not take Modvat credit on duty paid on Silicon Fluid; that the only fault of the appellant was that they had not sought permission under Rule 57F.Citing the case of Collector of Central Excise v. Chemphar Drugs reported in 1989 (40) E.L.T. 276, it was contended that the Hon'ble Supreme Court in this case had held :- "In order to make a demand under Section 11A of the CESA, 1944 for beyond a period of Six months and upto a period of five years, something positive other than mere inaction or failure on the part of the manufacturer or producer or deliberate withholding of information when the manufacturer knew otherwise is required to be established." It has therefore, been contended that there was no case for extending the period of demand. It has also been contended that the demand of duty under the proviso to Section 11A(I) must be issued by the Collector and adjudicated by the Collector under Section 11A(2); that in the instant case a show cause notice has been issued by the Addl.
Collector and the adjudication has also been done by the Addl.
Collector and therefore, the order lacks jurisdiction. In the prayer there is a request for setting aside the demand for duty and penalty.
4. Heard the submissions of Id. JDR, perused the grounds of appeal and other evidence on record and considered it. On careful consideration of the evidence on record, I find that the admitted position is that 42.500 kgs of Silicon Fluid for which Modvat credit was taken by the appellants' unit at Mayapuri was transferred without payment of duty or without reversing the Modvat credit already taken on this quantity to their Unit at Gurgaon. Thus there is a clear violation of Rule 57F(1)(ii), and therefore, demand of duty amounting to Rs. 25,993/- is substainable in law.
5. On the question whether the extended period of five years will be applicable to the facts of the present case specially in view of the decision cited and relied upon by the appellant and referred to (supra), I find that the goods were removed without obtaining prior permission of the Collector of Central Excise. As required under the relevant provisions of the Rule, no intimation about the transfer was sent to the Central Excise Authorities and therefore, it is a clear case of mis-statement and suppression of facts which led to evasion of duty. Therefore, there was not only inaction on the part of the appellant but also a positive defiance of law in as much as they did not inform the respondents that the goods were being transferred to their other unit. I, therefore, hold that the ratio of the judgment cited and relied upon by the appellant will not be applicable to the facts and circumstances of the case before me. Regarding the contention of the appellant that there was no loss of revenue to the Department inasmuch as on 42.500 kgs which were transferred to Gurgaon Unit no Modvat credit was taken by Gurgaon Unit. The question of Gurgaon Unit taking Modvat credit did not arise inasmuch as no duty paying documents accompanied the goods. Further, there is no verification of this statement that declaration of these goods as inputs was filed by the Gurgaon Unit to the department and that Gurgaon Unit was entitled to take such credit. Without going into this issue which is not before me for determination, I hold that, the contention regarding no loss of revenue to the department cannot be accepted at this stage 6. In regard to the lack of jurisdiction in issuing the show cause notice or adjudicating the case by Addl. Collector, I find that for purpose of adjudication and issue of show cause notice there is a clear provision in the Central Excise Rules which say Collector, includes Addl. Collector, I, therefore, hold that the Addl. Collector who issued the show cause notice and adjudicated the case was fully competent to do that. I hold that there was no lack of jurisdiction in the instant case. On the question of setting aside the penalty, I find that there is deliberate attempt to evade payment of duty and, therefore defiance of law. I, therefore, hold that imposition of penalty is sustainable in law. Looking to the value of the goods and the nature of offence I do not find the quantum of penalty as unreasonable.
7. In view of the above findings, the impugned order is upheld and the appeal is rejected.