Full Judgment
2. The brief facts of the case are that on 2-9-1986, the Central Excise Preventive Officers of Meerut Collectorate visited the premises of the appellants and found two Note books containing private accounts of removal of cement. On scrutiny of these Note books, the department came to the conclusion that 2,400 bags of cement each weighing 50 kgs. had been removed without payment of duty and without accountal in the statutory records. The officers also noticed that the appellants had received 10,000 HDPE bags from M/s. Mahalaxmi Polypack (P) Ltd., Muzafarnagar vide Bill No. 1066/87, dated 27-7-1987 while the statutory RG 9 register did not contain any entry of receipt. From the above, it was inferred that the appellants had manufactured and clandestinely removed 10,000 bags of cement without payment of duty by using the said 10,000 HDPE bags.
3. A show cause notice was issued to the appellants on 19-12-1988 proposing levy of duty of Rs. 13,950/- and proposing penal action for contravention of the relevant rules.
4. The appellants filed a detailed reply denying all the allegations levelled in the notice, submitting that they had procured gate passes for 2,400 bags of cement on the previous date while the actual removal took place on the. next date. He further submitted that 10,000 HDPE bags had actually been received on 16-7-1986 and entered in their RG 9 register. During the course of personal hearing before the Addl.
Collector, the appellants also submitted photocopies of the relevant ledger pages of the account books of M/s. Mahalaxmi Polypack Pvt. Ltd. to establish that payment had been made by the appellants only for 10,000 bags. The Adjudicating Authority dropped the demand of duty but imposed a penalty of Rs. 2 lakhs on the appellants for contravention of Rules 51A, 9(1), 173G(4) and 173F. Hence this appeal.
5. We have heard Shri V. Sridharan, learned Counsel for the appellants and Shri J.R. Singh, learned DR for the respondents and carefully considered their submissions.
6. We agree with the learned Counsel that, in the face of the finding that gate passes were procured and duty debits were made one day prior to the date of actual removal of goods (after tallying the details of 8 gate passes with the truck numbers shown for the removal of 2,400 bags of cement), no breach of Rule 51-A arises, as the Rule does not stipulate that duty paid goods should be cleared on the same day as payment of duty and only prescribes that no duty paid goods shall be retained in any part or premises of the factory.
7. Regarding the charge of receipt of 21,340 bags out of which only 11,340 have been accounted for, the records clearly show that 10,000 HDPE bags covered by Invoice No. 1066, dated 22-7-1986 were received by the appellants through Delivery Challan No. 1065, dated 16-7-1986. The Invoice (Page 26 of the paper book) itself bears an endorsement "Material received in store on 16-7-1986 quantity 9987 vide GR No.392".
8. In these circumstances, the finding of the adjudicating authority that the HDPE bags received on 16-7-1986 do not pertain to the consignment received from M/s. Mahalaxmi Polypack Pvt. Ltd. under Delivery Challan No. 1065, dated 16-7-1986 is untenable, in the absence of condition or restriction that individual entries should be made Delivery challan-wise for each and every receipt in the RG 9 register.
Further, the appellants have clearly established, with reference to the relevant correspondence exchanged between them and the suppliers of the bags, that out of the quantity of 11,340 number of bags, 10,000 bags were received tinder Delivery Challan dated 16-7-1986 and 1,340 bags were received as replacement under Delivery Challan No. 1064 of the same date. Therefore, the conclusion of the Collector that the appellants presumably manufactured and cleared cement clandestinely in 10,000 bags and consequently were liable to penalty, deserves to be set aside.
9. In the light of the above discussion, we set aside the impugned order and allow the appeal with consequential relief.