Full Judgment
1.1 In the appeal from M/s. Reliance Industries, the only relief claimed is that no penalty under Rule 173Q is imposable on them and the amount of Rs. 1/- crore imposed as penalty on them is not legally sustainable. Hence the Collector's order to that extent should be modified and the amount of Rs. 1/-crore imposed as penalty be taken towards interest payable on the wrong credit taken in July, 1983 due to bona fide clerical error.
1.2 In the appeal from the Revenue, they have found fault with Collector's findings giving M/s. Reliance Industries a clear chit with regard to allegation of fraud, collusion, wilful misstatement etc. and failure to consider the evidences and case laws properly on account of which lower penalty has been imposed, which calls for enhancement.
1.3 The facts, in brief, are that M/s. Reliance Industries are alleged to have taken false credit to the extent of Rs. 1.17 crores during July, 1983 and the false credit was detected on receipt of specific information. In the course of investigations with the concerned staff of the factory maintaining the record, it was revealed that the credit was deliberately taken without any authority under the instructions of their Director and one Shri Pai , assisting Shri N.H. Ambani in financial matters. Statements of a number of persons connected with finance management, audit of the accounts, excise in charge of the unit, were recorded and it was alleged that the wrong credit was taken deliberately with intention to evade duty on the final products and proposed to impose penalty. Since Reliance admitted of wrong credit and paid up the duty to the extent of Rs. 1.17 crores, this payment made was proposed to be confirmed. Hence show cause notice was issued by the Collector against M/s. Reliance Industries Ltd. for confirming the demand for duty (already paid) invoking the proviso to Section 11A of the Act and for imposing penalty under Rule 173Q(a) and (d) of Central Excise Rules. In the adjudication proceedings held by the Collector, he did not choose to rely on the statements of the two officers of Reliance Industries on the ground that they are coaccused in the prosecution launched by the Department and extended period is not applicable. All the same, he confirmed the duty demand for Rs. 1.17 crores on the ground that the amount is legally payable to the Department. He also rejected their offer of interest and imposed a penalty of Rs. 1/- crores on M/s. Reliance Industries Ltd. 3. Shri J.J. Bhatt, the Ld. Advocate on behalf of M/s. Reliance Industries and Shri K.P. Mishra on behalf of the Revenue advanced elaborate arguments for supporting their appeals. For the sake of brevity we are not separately recording their arguments; but highlight them at the appropriate places in our findings.
4. After hearing both the sides, we find that the admitted position is that a credit of about Rs. 1.17 crores was taken in excess in RG 23 Part II account, by taking double the amount of credit and shown as opening balance at page 81 of RG 23 Part II record.
4.1 On scrutiny of the extracts of RG 23 Part II, we find the following position.
As per the Asstt. Collector's letter dated 7-7-1983, the following credits were permitted and noted against No. 2307, dated 8-7-1983 (page 78) B.E.D. S.E.D. Addtnl. Duty (in Rs.) 31,71,626.50 3,17,162.65 4,75,744.03 62,16,387.94 6,21,638.79 9,32,458.20 ----------------------------------------------------------Total: 93,88,014.44 9,38,801.44 14,08,202.23 The total at page 78 is in respect of fresh credit allowed as per Assistant Collector's letter dated 7-7-1983 was shown at the bottom of the page as indicated above. On page 79 and 80 of the register, the opening balance and total of fresh credit allowed is shown as the same as above. However, on page 81 of the register, the amount brought forward is shown as below : B.E.D. S.E.D. Additional Duty (in Rs.)1,87,76,028.88 18,77,602.88 28,16,404.46 It is thus observed that the amounts brought forward at page 81 are double the amounts indicated on the previous page and the excess credits are not supported by any entries in the corresponding columns for indicating the particulars of duty paid GP1s.
At entry No. 2399 on page 80, the balance of credit (col. 10) was shown as under :- B.E.D. S.E.D. Additional Duty (in Rs.)12,60,380.59 1,26,037.87 5,64,216.16 Below the above entry, an entry without any S. No. has been made, when the above closing balance was shown as opening balance and additional credits as indicated below were entered.
B.E.D. S.E.D. Additional Duty (in Rs.)93,88,014.44 9,38,801.44 14,08,202.23 Thus a total of Rs. 1,17,35,018.11 is found to have been entered in the register without cover of any duty paying documents or Assistant Collector's order permitting credit. The above credit has been utilised towards payment of duty from 12-7-1983 to 15-7-1983 leaving a marginal balance of Rs. 1,178.78 under B.E.D., Rs. 117.84 under SED and Rs. 179.78 under A.E.D. The above position is noticed on scrutiny of the RG 23 Part II register produced before us and the same is not disputed by both the sides.
5. The bone of contention between the two sides is that Revenue contends that it is a deliberate insertion done to avail this unauthorised credit for payment of duty illegally and removals so effected debiting this false credit are without payment of duty and this is a deliberate act of suppression, fraud, wilful misstatement attracting extended period for demand and penal provision under the Central Excise Rules. The assessee, on the other hand, contended that the entry aforesaid is no doubt wrong, but it is a bona fide mistake.
It is only on account of a clerical error and not a deliberate one.
6. Shri Bhatt, the Ld. Advocate, during hearing before us, agrees that the amount of Rs. 1.17 crores is payable by them and he does not want to plead time bar of the demand. They have paid the amount in PLA within a few days, when this mistake was pointed out by the Officers and they even offered to pay interest on this amount for the period of 4 years, during which period the amount was in their hands. Before us, he does not seek to claim any relief in respect of the amount of Rs. 1/- crore deposited towards penalty as per adjudication order. Though, in their appeal Memorandum, contentions have been raised challenging the penalty imposed, he is not pressing for reduction but would only plead that the Tribunal must make an observation that the amount of Rs. 1/- crore is not to be treated as penalty but as a payment towards interest payable. The above amount works out to about 18% interest for 4 years, which should be adequate compensation for the revenue. He also pleads that there is no case for increase in penalty, especially when the admitted position is that original and duplicate copies of RG 23A Part II are submitted to the Range Officer alongwith RT 12 returns for scrutiny by the Range Officer and the Accounts Department of the Collectorate. Besides many internal audit parties including C.E.R.A.audits have been conducted and thus wrong credit has not been detected by any one of the agencies. Hence, if this could be on account of omission on the part of the Revenue Officers, the same benefit of doubt could also be given to the assessee. The appeal from the revenue presents one side of the picture keeping silent on the factual position of the lapse on their part. The Collector has appreciated this position after taking into account all the evidences produced and has come to the conclusion that this is not a case of fraud, collusion or suppression. In the context of these findings, he could not have imposed a penalty of Rs. 1/- crores. He could have accepted their offer to pay interest and collected this amount as interest, which he would now urge for acceptance before the Tribunal.
7.1 The above arguments prima facie appear reasonable and could find ready acceptance, but for the appeal filed by the Revenue, which challenges the very same findings of the Collector on fraud, suppression etc. and seeks for enhancement of penalty. This requires us to go into the details of the evidences and the allegations made by the Department in the show cause notice and reappreciate the evidences.
7.2 Before going into the question of mens rea, we are to consider the question, whether instead of penalty, offer of interest could be accepted and the matter finalised by the Collector or by us. The Supreme Court have clearly held that the authorities functioning under the statute are to go by what is prescribed in the Statute. Though Tribunals have some inherent powers, such powers can be exercised for disposing of the appeals before them within the four corners of the statute. It is laid down in the Judicial pronouncements that the Tribunal is also a creature of the statute and has to go by what is prescribed in the Statute, whereas the High Courts or the Supreme Court have vast inherent powers under the Writ Jurisdiction to award interest on delayed payments of duty by the assessees or in respect of delayed refund by the Department. In the circumstances, the plea made by the Ld. Advocate for modifying the amount of Rs. 1/- crore as interest instead of penalty cannot be done under the Statute in the absence of specific provisions laid down in the Act or in the Rules for levy of interest on delayed payments of duty.
7.3 Now the next question to be considered is, whether even in the absence of ingredient of 'Mens rea', penalty can be imposed in this case. The admitted position is that credit to the extent of about Rs. 1.17 crores has been wrongly taken by the assessee's employees dealing with day to day maintenance of the records. However this credit is not the one allowed under Rule 56A(2), because of the fact that in regard to this credit, there are neither evidences of receipt of duty paid inputs under Gate Pass nor receipt of the inputs having been intimated to the authorities by filing D-3 declarations and keeping these for the prescribed period for enabling verification of receipts. Hence we are to construe that the credit is not the one allowed by the authorities under Rule 56A, but the one taken by the factory's employees on their own, irrespective of whether deliberately or due to clerical error.
This has also been specifically alleged in the Show Cause Notices.
(Vide para 16 of the said notice). In the circumstances, such credit, which is not allowed by the Officer but taken wrongly for whatever be the reason, is required to be paid back and by utilising such an unauthorised credit, if removals of final products have been effected by debiting from the unauthorised credit, they are to be construed as removals without payment of duty and hence would come within the purview of Rule 173Q(1)(a) of the Central Excise Rules. On a careful reading of the provisions of Rule 173Q, we find that in regard to violations of sub-rules (a), (b) and (c) of the Rule, intention of evasion of duty is not prescribed in the statute, which is found in Rule 173Q(i)(d) only. When the rules make a clear distinction as above, there is not scope for bringing 'Mens rea' into this case, when the admitted position is that excess credit was taken unauthorisedly and it was utilised resulting in clearance of final products without payment of duty. Hence we are to hold that even assuming that there is no mens rea or there is no fraud/suppression etc, penalty is legally justifiable under Rule 173Q(1)(a). We also find that the same view was taken by the South Regional Bench, relying on the decision of the Supreme Court - vide para 25 and 26 of the decision reported in 1985 (22) E.L.T. 413.
8.1 Now we come to the Department's appeal pleading that there is a deliberate/ misstatement by inserting a credit in a deliberate manner for purposes of evasion of duty and hence calls for increased penalty.
(i) Shri Dilip Kumar Ranchodbhai, Excise Clerk of the factory admitted that it was not a clerical mistake but was done intentionally under the instructions of one Shri Suman T. Patel, Dy.
Excise Officer of the factory.
(ii) Shri Suman T. Patel admitted and confirmed the facts stated by Shri Dilipkumar. He also further revealed that the false credit was taken under the instructions of Shri R.L. Meshwani, Director of the Unit and Shri V.T. Pai , Manager, (Finance) stationed at Bombay. He revealed that Shri Pai had come to Ahmedabad and stayed at Cama Hotel. Shri Pai had come to office on the day, wrong credit was taken and has seen RG 23 Part II register and noticed the manner in which the register was maintained. Suman Patel also confirmed having informed to Shri Pai on phone that the excess credit taken under his instructions has been utilised. Shri Pai assured Shri Suman Patel not to worry by saying that in case the excess credit was noticed by the Excise Department, they will pay up the duty, and that the management was aware of this fact. Shri Dilip Kumar was not willing to make the entry; but Shri Pai insisted that the entry had to be made, since the goods were to be despatched urgently and there was no sufficiant balance in PLA and the proforma credit scheme was to expire oh 15-7-1983 and as there was huge stock of texturised yarn made out of yarn brought under proforma credit, they had decided to take this false credit in RG 23 Part II. He also deposed that closing balance on 30-6-1983 in RG 23 part II was a meagre amount and from 1-7-1983 to 7th July, 1983, they had effected clearances against PLA. After 1-7-1983, no fresh credit can be taken in RG 23 Part-II and in such a situation, the Bombay Office was aware of the non-availability of credit in RG 23 Part II for the month of July, 1983. On 8-7-1983, when credit of Rs. 1.17 crores was taken under Assistant Collector's order dated 7-7-1983 (vide entry at 2307), he had informed Shri T.N. Ramakrishnan, Finance Manager and Shri G.S. Shekon Crimping Manager about the credit, under which about 125 tonnes only could be cleared. He did not inform the Accounts Department on 11-7-1983 that RG 23 Part II would be available for only one day. Bombay Office knew that credit allowed by the Assistant Collector was adequate only for a few days. For the purpose of making monthly returns to the Excise Department, any one of the clerks would compile the data from the relevant records - namely RG 1, PLA, RG 23 etc. and would enter these particulars in RT 12 returns. While checking the R.T. 12 returns, he did not object to the inflated figure of RG 23 Part-II because he knew that false credit to the extent of Rs. 1.17 crores was included in this. Shri Manubhai Patel, who had signed the R.T. 12 returns had not raised any objection, presumabley because he might have been told about false credit by Shri Pai. He also deposed that he did not have any ill will or enemity against Shri V.T. Pai.
(iii) Shri Dilip Kumar, again gave a statement on 3-6-1987, wherein he reiterated his earlier statement and confirmed that Shri Pai visited the office on the day, when the wrong credit was taken and Shri Pai had talked to Shri Suman Patel on some matters. Though Shri Dilip Kumar was not willing to make the wrong entry, Shri Suman Patel had told him that somehow they had to make this entry and thereafter he made the false entry in the register.
(iv) Shri Manubhai Patel, Excise In charge of the unit in his statement admitted that he signed the RT 12 returns but had not checked the details and he was aware of the credit allowed by Assistant Collector on 7-7-1983. Even though he had knowledge that the closing balance at the end of June 1983 was a nominal amount and no fresh credit was allowable in July, 1983. and the only credit allowed was under Assistant Collector's letter dated 7-7-1983, he could not notice the fact that credit was shown in the RT 12 return to the extent of double the amount of Rs. 1.17 crores. He had seen the. letter of Shri Sushilbhai Kothari addressed to Member (Anti-evasion) in which Shri Kothari has reported that a credit of Rs. 1.17 crores was taken due to clerical mistake and Shri Kothari has explained in his statement dated 30-6-1987 that the error was a clerical mistake, after conducting enquiries with Shri Manubhai. He did not enquire with Shri Dilip Patel and Suman Patel but made this report on seeing the entry himself, in the excise office. Later on, when he wanted to enquire with Shri Suman Patel, the latter told him that Shri Suman Patel had already given his statement in this regard to the Excise Officers. It is also revealed from the statement of Shri Manubhai Patel that he was confronted by Suman Patel on 2-7-1987, when Shri Suman Patel told before him that wrong credit of Rs. 1.17 crores was taken on 12-7-1983 under the instructions of Shri V.T. Pai.
(v) Shri R.L. Meshwani, Director had already expired and his statement could not be obtained by the Officers of the revenue.
However Shri V.T. Pai's statement was recorded on 16-6-1987 and 7-7-1987. He revealed that during 1970 to 1983, he mainly looked after the costing of production of fabrics and texturised yarn and the nature of his job required him to visit Ahmedabad and there was no post of General Manager (Finance) prior to 1983 and Shri N.H. Ambani, Director (Finance) was looking after the finance and he had been assisting Shri N.H. Ambani in so far as banking and finance were concerned, because of his experience for 13 years. He admitted to have issued telexes concerning fund management to Ahmedabad.
However the decisions like deployment of funds, real-location of funds and T.T. transfer to Bombay and vice versa were taken with the approval of Shri N.H. Ambani. After seeing the entries in the RG 23 Part II record, he admits the balance of credit as on 30-6-1983 and during the period from 1-7-1983 to 7-7-1983, except in case of one debit in RG 23 account all other debits were made in PLA. On 8-7-1983; credit of Rs. 1.17 crores was taken as allowed under Assistant Collector's letter dated 7-7-1983, which was utilised on 8th, 9th, 11th and 12th July, 1983 and another credit of the same amount was taken on 12-7-1983 at page 80 against unserialled entry, which was utilised on 13th, 14th and 15th July, 1983. Credit of Rs. 1.13 crores was utilised in just 2 days and an amount of Rs. 56 lakhs had been debited from the credit on each day on 13th and 14th July, 1983. Shri Meshwani would have talked with Shri N.H. Ambani organising, funds. He did not remember whether any such discussions took place on the above dates.
(vi) Shri Pai also confirmed his stay in Cama Hotel from 11-7-1983 to 13-7-1983. However after going through the statements of S/Shri Suman J. Patel and Dilipkumar he stated that though he stayed in Ahmedabad during those days and visited office on that day, he never gave instructions to them and he does not know why they made such entries in RG 23 Part II. His company has already paid Rs. 1.17 crores in June 1987 and the company had not gained anything in this matter excepting the interest element from 1983 to 1987 and he would discuss the matter with the management and might pay interest in case, it was so decided.
(vii) The statements of others connected with finance management and audit of accounts of the unit were recorded and they do not bring out any direct nexus to the wrong credit taken on 12-7-1983. The Auditors admitted that they have not noticed this excess credit during their audit, since they do not scrutinize records like RG 23.
They confirm that the unserialled entry in Page 80 is a deviation from the normal manner followed by the Mills prior to page 80 and this particular manner of insertion has been followed only on page (viii) When the statement of Shri N.H. Ambani was recorded on 16-7-1987, he inter alia stated with regard to the wrong credit that it relates to Ahmedabad plant and it was for the plant management to look into the circumstances under which this credit was taken.
(ix) Shri Dhirubhai Ambani in his statements dated 21-7-1987, inter alia denied any knowledge with regard to the wrong credit taken on 12-7-1983 at Ahmedabad plant and that he is now informed of the mistake detected by the Excise Department and that the amount had been made good. According to him, it is the job of Ahmedabad management to look into that and take corrective steps.
8.3 The plea from the assessee against these evidences is to the effect that barring the statement of S/Shri Dilipkumar and Suman Patel, no other officers of the factory have supported these contentions that the entry was deliberately made under the instructions of the management.
Shri Meshwani is dead and not available to explain ordering and Shri Pai has denied giving any instructions. The nature of Shri Pai's job demands frequent visits to Ahmedabad unit. Hence his presence during the crucial period in Ahmedabad and his visit to office on 12-7-1983 cannot support their contentions, especially when he has denied having given any such instructions. Moreover, when enquiry proceedings were initiated by the company against the above two officers they came out with the truth that the Excise Officers obtained their statements in a distorted manner under duress. They have filed affidavits to that effect. They also revealed this position in the cross-examination before the adjudicating authority. Hence these statements cannot be accepted on their face value without corroboration. They are co-accused and hence corroborated testimony of the coaccused cannot be accepted for holding mens rea against them.
8.4 An attempt is also made to contend that the wrong entry was not made by Shri Dilipkumar and it is not in his handwriting; but no handwriting expert's opinion has been produced by them to show that it has been made by someone else. On query by the Bench, during the hearing, this aspect was not pressed by the Counsel.
8.5 Though contradictions and improbabilities in the statements of Suman and Dilip are pleaded, the admitted position is that the deponents have not retracted from their various statements given before the Central Excise Supdt. and it was also revealed to us, that the affidavits were filed by these two employees after proposed enquiry against those Officers, by the management. Even the Collector has held that their deposition during cross-examination cannot be given much credence, and has held that in so far as the adjudication is concerned, their original statements stand. But the Collector has held that there is no further evidence to support the contentions of Suman and Dilip.
Since Suman and Dilip are coaccused in the prosecution launched by the Department, the Collector chooses to hold that the evidences are not acceptable in the absence of corroboration. The assessees also rely on this position, as held by the Collector to plead that mens rea has not been established.
9.1 We have carefully considered the pros and cons of the above arguments. Though penal proceedings are of quasi-criminal nature, the standards of evidence are not those as applicable in the court proceedings. Though Suman and Dilip are reportedly prosecuted alongwith others in the court of law, they do not ipso facto become coaccused in the adjudication proceedings. Here they are not even co-noticees.
Because the S.C.N. is addressed only to M/s. Reliance Industries and not to any Officers of the assessee. Hence, applying the case laws with regard to the testimony of coaccused, in our opinion, is misplaced.
They are the persons authorised by M/s. Reliance Industries with the task of maintaining the excise records and they are to ensure correct credit and debits in the accounts, relating to Central Excise duty.
When both of them, who attend the day to day maintenance of the records, confirm categorically that the entry was a deliberate insertion carried out at the instance of S/Shri R.L. Meshwani, Director and T.M. Pai, who had come from Bombay to Ahmedabad during the crucial period and visited the office on 12-7-1983; and gave instructions to carry out false credit, after perusing the manner in which RG 23 Part n was maintained, can it be thrown out of the picture on the ground that they are coaccused in the prosecution? We are of the view that the Collector is not right in treating them as coaccused in the proceedings before him, when the S.C.N. has been issued only against R.I.L. and no one else. They are to be treated as witnesses in the adjudication proceedings but their testimony is not the one of the coaccused.
9.2 Now even the observation of the Collector that their version is not corroborated, does not seem to be in order because Mr. Pai does not deny that he was staying in Cama Hotel, Ahmedabad during the crucial period and had visited the office on 12-7-1983 - the day on which the wrong credit was made. Hence Shri Suman's version is substantially corrobrated to the above extent. Shri Pai's denial of having given instructions to them for making wrong entry and the plea that his visit to Ahmedabad was for some other purpose does not carry conviction, because if the position stated by Suman was a statement under duress, as pleaded subsequently, the Officers could not have put in his mouth the name of the hotel, where Pai was staying and would not have made a statement that Pai came to the office on 12-7-1983 and perused the manner of maintenance of RG 23. It is significant that the wrong entry was admittedly made on 12-7-1983 and Shri Pai admits to have visited the office on that day. Moreover, Shri Suman's version that Pai assured him that nothing serious will happen, and if false credit is detected, the amount will be paid up, is also supported by Pai's statement to the effect that duty has already been paid and there is no loss to the Govt. and if need be, he will consult his management for paying interest. Hence Pai's denial of having given instruction for making false entry, stands out as lone exception, as compared to other parts of his statements, substantially corroborating the version of Suman. It also reveals that he controls the person who might have been instrumental for the offer of interest later made by the management.
9.3 It is not the case of R.I.L. that S/Shri Suman and Dilip are their disgruntled employees and they were out to malign the fair name of the institution. Their plea is only to the effect that these two employees' statements were obtained under threat and contain improbabilities and inconsistencies and the true position is revealed only in their subsequent affidavits and in their deposition during their cross-examination. They also produced copies of letters dated 25-7-1987 of Suman and Dilip addressed to RIL, copy of the S.C.N. dated 26-7-1987 issued by Reliance Industries Ltd. to these two Officers, copies of their replies dated 30-7-1987 and copies of affidavits affirmed on 16-9-1987 by these two officers, vide their letter dated 30-7-1994 (after the hearing was over in pursuance of their request for considering these documents for appreciating their arguments made during the hearing). We have seen these documents. Since our impression about these documents now produced alongwith the Solicitor firm's letter dated 30-7-1994 do not seem to help their case, we did not consider it necessary to refer them to the SDR and have his say on these documents.
(i) Both S/Shri Suman and Dilip have started correspondence on the same date (25-7-1987) after the issue of S.C.N. to Reliance Industries Ltd. by the Collector and not at any point of time during the period of investigation. They have not chosen to reveal a contra position, either immediately after giving their first statement on 23-5-1987 or at any time thereafter, when Suman was giving a series of statements on 3-6-1987, 8-6-1987,9-6-1987,16-6-1987 and 4-7-1987.
In all these statements he has not budged from the stand that false entry was made under instructions of Pai. Likewise Dilip also has given two statements on 23-5-1987 and 16-6-1987, but chooses to start a correspondence with management only on 25-7-1987 pleading more or less the same grounds as those pleaded by Suman.
(ii) We also find that on the next day - 26-7-1987, his management issued S.C.N. to both the individuals calling upon them to explain the significance of these statements made before excise officials giving them just 2 days for reply further intimating that failing which Departmental action will be taken against them.
(iii) In more or less identical replies by them vide their letters dated 30-7-1987 S/Shri Suman & Dilip contended before the Management that the incriminating words were put in their statements by Officers promising protection from prosecution and a share of part of the reward likely to be received by them.
(iv) Affidavits sworn by both on 16-9-1987 also run on the same lines.
(v) The somewhat identically worded letters, replies and affidavits seem to indicate that fire fighting exercise commenced, only after issue of S.C.N. to the firm and defence was built up in the form of these documents apparently under legal advice. They are bereft of credibility and also appear to have been taken under duress, on the threat of Departmental action being taken against them, if they did not explain within two days. They appear to have no option but to say as desired by the Management to save their jobs.
(vi) Thus we find that S/Shri Suman and Dilip are placed in an unenviable position for telling the truth in their original deposition. It is a pity that they have drawn flak from both the sides, by way of prosecution by C. Ex. Dept and by way of Departmental action by their management.
(vii) In any case, even after considering these documents, we are satisfied that their original versions stand the test of credibility as compared to their subsequent versions, which appear to be solicited and made up under legal advice.
9.4 We also find that Shri Manubhai Patel, Excise in charge of the unit, who has signed the R.T. 12 returns confirms that he was aware of the legal position that no credit could be taken in respect of receipts of inputs after 1-7-1983 and he was also aware of the credit allowed by Assistant Collector in respect of stocks on 7-7-1983 to the extent of Rs. 1.17 crores. All the same his contention that he did not notice the credit to the extent of double the amount of Rs. 1.17 crores as reflected in the RT 12 returns, indicates that either he was signing the returns blindly or was acquiescing in the wrong entry, because when he is aware of these details, the inflated figure would not have escaped his notice.
9.5 From the above discussions, we are led to believe that all is not well with their claim of bona fide clerical error. The fact of palpable false entry was known at least upto the level of Shri Pai. There are no direct evidences implicating the Top management in Bombay, though presumption can go upto them, because Reliance Industries Ltd. is the ultimate beneficiary. However, even in the adjudication proceedings, one cannot jump to a conclusion on presumptions and surmises or suspicion. Moreover, we are not called upon to give our verdict on the individual's penal liabilities, since S.C.N. itself was directed only against Reliance Industries Ltd. and not against any individual. Hence we leave the matter with the observations required to the extent of assessing the culpability of the company.
9.6 When we arrive at a conclusion that there is a palpable false entry made and evidences indicate that it has been done with the knowledge upto the level of authorised Officers entrusted with the day to day maintenance of records and furnishing returns, penal provisions are inescapable against the company, irrespective of whether Top management was having direct knowledge or otherwise.
10.1 Now we are to consider the question whether there could be any motive. Even if we agree that Reliance Industries Ltd. is dealing in crores of rupees and Rs. 1/- crore may be a pittance compared to their turnover and profits and they could not have resorted to this credit owing to cash crunch, we are to take note of the following position.
(ii) Their final product-texturised yarn stood exempted vide Notification No. 178/83-C.E., dated 1-7-1983.
(iii) Under this Notification, texturised yarn is exempted from 1-7-1983. As per proviso (ii) to this notification, the exemption is not applicable if texturised yarn has been manufactured out of the filament yarn, in respect of which proforma credit has been allowed under Rule 56A. (iv) This would mean that stocks of texturised yarn manufactured by them, out of proforma credit allowed filament yarn lying in stock has to be cleared on payment of duty. The evidences point out that they had a huge stock of such texturised yarn, which had to be cleared on payment of duty. Their RG 23 credit balance as at the end of 30-6-1983 was not substantial. Credit allowed on 7-7-1983 was to the extent of Rs. 1.17 crores only, which would suttice for 125 tonnes, as stated by their own staff. Hence if a credit has been taken on 12-7-1983 out of the blues and vanished within a period of two or three days at the average rate of nearly Rs. 56/- lakhs per day, the motive could be to use this credit for clearance of such stock of texturised yarn manufactured out of proforma credit input, for which exemption cannot be availed of and they had a fairly huge stock of such texturised yarn with them.
10.2 Thus in the ultimate analysis, we are to hold that there is a wilful mistatement with regard to the credit taken on 12-7-1983 to the extent of about Rs. 1.17 crores. The Supreme Court in the case of Camphor Drugs & Liniments -1989 (40) E.L.T. 276 (SC), held that something positive other than mere inaction or failure on the part of the manufacturer or some conscious or deliberate withholding of information, which the manufacturer knew otherwise, must be established. In this case, though the entry was made in RG 23 Pt II - copy of which is required to be submitted to the Range Officer alongwith R.T. 12 returns for scrutiny, there is a deliberate false entry in the record, which was made with the knowledge of the officers of Reliance Industries Ltd. connected with preparation of the R.T. 121 returns and maintaining the RG 23 record. Hence, in such a case, extended period for demand is available even as per the decision of the Supreme Court and on that ground levy of penalty is also justifiable.
11.1 Now we come to the last item in the agenda - namely the Department's plea for enhancement of penalty. There is no whisper of allegation by the Department that RG 23 Part n copies were not furnished to Range Officer alongwith RT 12 returns. As per the law, two copies of the RG 23 Part II are required to be submitted alongwith RT 12 returns, out of which one is normally sent to Accounts Section. The S.C.N. itself (vide para (vi) - page 29) alleges "the mistake could have been detected by a careful scrutiny of RT 12 return, which shows double the amount of credit taken than actually earned for the month of July, 1987". This allegation made against the assessee is equally applicable to Departmental agencies, who are entrusted with scrutiny of RT 12 returns at the range level and also by audit parties. It is not the case of the Department that these extracts were kept away from these agencies. Hence part of the blame for leaving this amount in the hands of the assessee for long is to be borne by the Department also.
Though under S.R.P. trust is placed on the assessee, it does not absolve the Officers of Central Excise Department of the duties cast on them for scrutiny of the returns and checking the credits and debits made in PLA and RG 23. Had those agencies performed their job with reasonable efficiency, the wrong credit would have come to surface long back, instead of waiting for an information, after 4 years of credit, to act upon. Hence in this background, .we are not persuaded to hike the penalty of Rs. 1/- crores against duty evasion of Rs. 1.17 crores, especially when the admitted position is that Government's loss on account of non-recovery of this amount in time (part of the blame for this is to be shared by the Departmental Agencies) has been more than compensated by the penalty imposed and recovered. Moreover, we are told that prosecution proceedings against Reliance Industries Ltd. have been initiated and any further corrective/punitive action is best left to be taken care of by the court in accordance with law.
11.2 Though under the law, there is scope for going upto the maximum limit permitted under Rule 173Q, for imposing penalty, we are also to take note of the post-detection conduct of the assessee in this case, by making the payment within a few days of detection and their offer to pay such sums as interest to compensate the revenue for the loss caused on account of their action. Their aspect cannot be totally ignored, even in a case where we have come to the conclusion accepting the plea of revenue on the ground of mens rea against Reliance Industries Ltd. We agree with Revenue that there is a palpable false credit taken and do not get convinced of the plea of Reliance Industries Ltd. that it is bona fide clerical error. All the same, we are to take note of the post-detection conduct in such cases. If we choose to enhance the penalty further, when prosecution against them is also on the way, it would give a wrong signal showing that heavy-handed penalty is justified in a case, even when the asses-see makes amends for their wrong action in causing loss to Revenue, as against a person protracting payments through judicial process. In this background, we feel restrained and do not consider it necessary to hike the penalty further, apart from other considerations set out in the preceding para.
12. In the result, Appeal No. 810/89 from M/s. Reliance Industries is rejected. As regards A. No. 625/90 from the revenue, we agree with the contention of the revenue to the extent that there is a wilful misstatement in the false entry made in RG 23 record and the Collector's finding on the absence of mens rea is not acceptable to us.
All the same, for the reasons recorded in para 11 above, we could not persuade ourselves to increase the penalty further. Penalty of Rs. 1 crores for the attempted duty evasion of Rs. 1.17 crores, in the circumstances discussed in para 11, would, in our view, meet the ends of justice.
13. While concurring with the conclusions drawn and final order proposed in relation to both the appeals, by way of supplementing to what has been observed hereinabove, it appears expedient to also highlight certain additional aspects in relation to both the appeals.
14.1 So far as the appeal filed by the RIL is concerned, though there is an admission on their part to have availed credit in excess to what was eligible to them, the plea raised is that it was on account of some bona fide clerical error, in as much as, while carrying forward the figures on the next page, instead of noting the same figures as they appeared at the bottom of the page, the personnel in-charge, have drawn a total of the figures shown at the top as also at the bottom and the total so worked out has been mentioned at the top of the next page. Mr.
Dilip Patel and Mr. Suman Patel, who were incharge of making entries in RG 23, have not only not accepted the same as clerical error, but have on the contrary, attributed the same as having been done at a specific directions from their higher Officers. Reliability of their statements initially given, is sought to be doubted on multiple grounds. Apart from any other aspects, which have been discussed by the Ld. Member (T) in extenso, a glance at various pages of the said Register (xerox copies of which have been produced) leads to indicate that the disputed entry could not have emerged as sheer clerical error.
14.2 Going through the xerox copies of pages 79 to 83 of RG 23 Register produced, it appears that a uniform method was being followed for filling in various columns. Whereas each entry was being serially numbered as required vide column 1, on all pages the last line was being left unutilised, for mentioning the figures of the relevant columns which were required to be carried forward for proper accounting, on the next page and as is evident from the entries on pages 79 to 83, such figures were being clearly indicated on the first line on each next page. Unlike the usual practice followed and deviating therefrom, on page 80, in the last line, entries have been made so far as column No. 3 is concerned, without filling in column No.1, which is for giving serial number. If the entry in the last line was put inadvertently, which allegedly resulted in clerical lapse, the same would have been at least, serially numbered. Here the entry preceding the disputed entry is numbered as 2399 and the first entry on page 81 is numbered as 2400. Further, as is evident from the rest of the pages in the said Register, the figures posted in the last line of a page were being posted in the same mode and manner without any variation, in the first line in each corresponding column on the next page.
Significantly, while carrying forward the entries in the last line on page 80 to the first line on page 81, though for rest of the columns, there is no variation, it is only in relation to the disputed entry that the figure is doubted. A person regularly maintaining the accounts and posting around 10 to 15 entries a day. could not be presumed to have committed such an error, and he is not reported to be a novice.
Thus even if the statements of Mr. Dilip Patel and Mr. Suman Patel, admitting to have deliberately done so, are kept aside, the very documents and the procedure usually followed for due maintenance thereof and the mode and manner the disputed entry has come to be recorded, are contra-indicative to the plea of a bona fide error or lapse.
14.3 Thus, over and above what the Ld. Member (T) has discussed, the points indicated above lead to the conclusion that the plea of bona fide cannot be accepted.
15. As regards the appeal preferred by the Department, while the view fours of the adjudicating authority may not be endorsed on all fours, the prayer in the appeal, for the enhancement in penalty amount, cannot be accepted, firstly because, penalty to the extent of nearly 95% of the duty evaded has already been levied. For the purpose of enhancement, some strong grounds ought to exist, which do not appear to be existing, and otherwise also, the blame for evasion of duty has to be equally shared by the Department. The Reliance Industries Ltd. has never attempted to withhold the relevant documents, and as is evident, audit party from the appellant too, had audited the accounts. The principal object of such audit parties is to find out whether the assessee has been regular in maintaining accounts and the Government dues have been properly paid. If such a party, whose main job is to detect such lapses, (whether they may be intentional or have advertently crept in) fails to discharge the duty assigned, the same would tantamount to contributory lapse, and it may not justifiably be open for the department to plead that exemplary penalty ought to be imposed on the assessee. The penalty imposed appears to be fair and reasonable.