Pooja Forge Pvt. Ltd. Vs. Collector of Central Excise

1. In this appeal, there has been imposition of confiscation fine of Rs. 40,000/- and penalty of Rs. 5,000/- under Rule 173Q of Central Excise Rules, 1944 on the allegation that the goods had not been accounted in the RG-1 register in respect of goods manufactured on 9-11-1992 and found lying in the finished room by the officials raiding the premises on the morning of 10-111992. The allegation in short is that on physical verification carried out of the finished goods in the factory in respect of goods nuts, bolts and screws, it was found to be in excess than the recorded balance in RG-1 register. The statement of Shri Manish Aggarwal was also recorded who admitted the excess stock of finished goods than the recorded balance of RG-1 register. Therefore, the department alleged contraventions of Rule 173G and 226 of Central Excise Rules, 1944. The appellants in reply to the show cause notice took a specific stand that the goods had not reached RG-1 stage, as they were still in unpacked loose condition, and as per Delhi Central Excise Collectorate Trade Notice No. 3-C.E./84, dated 28-1-1984 the goods would reach RG-1 stage only after they are counted and sold by number and/or packed in cartons/gunny bags and sold by weight. They had stated that they were selling the goods as per numbers and packed in card board packets. On the date of raid, the goods had not been counted and they had not been packed. These pleas has been rejected by the Assistant Collector on the ground that the entire quantity of goods were being removed on the date of manufacture showing nil balance in bonded store room. They had not made any entry in column 15 of the RG-1 register with regard to the goods kept in finishing room. Therefore, he found that there was contradiction in the stand inasmuch as that the goods are entered in RG-1 register after the daily production report has been prepared and RG-1 stage is when the goods are inspected and packed in cartons. He has noticed that the daily production report shows both the quantity of pieces manufactured and the packets produced at the end of the day whereas in the RG-1 register party is entering the quantity manufactured in numbers only and not in the form of packets. He has also held that even if the party's contention is accepted i.e. that they have not reached RG-1 stage as they had not counted and not packed, even then the party should have accounted for them in column 15 of RG-1 register i.e. stock lying in finishing room.

Therefore, he has held that they had an intention to clandestinely remove these goods without payment of duty. These findings have been confirmed by the Learned Collector.

2. I have heard the Learned Consultant, Shri R. Pal Singh for the appellants and the Learned DR, Shri P. Dass for the Revenue.

3. The Learned Consultant argued and drew attention to the evidence of the case and submitted that the managing director, was a young person of 22 years and he had taken up this job recently and did not have full knowledge of the excise procedure. He submitted that the officials had taken 18 hours to count the goods, the production was of the previous night and they were to have to put the same in packets after weightment and numbering and thereafter it would have been entered in the RG-1 on the morning of 10th Nov., 1992. In the meantime, the officer had entered the premises and conducted the raid. He submitted that for the purpose of confiscation, the department has to show that an attempt for clandestine removal was being made. In this case the goods had not yet entered RG-1 stage. The goods could not have been removed in unpacked condition and therefore, there was nothing on record to show that the party had admitted to clandestinely remove the goods. In this connection he relied on the judgment rendered in the case of Garden Silk Mills v. Collector of Central Excise, as reported in 1991 (51) E.L.T. 373 and that of Western Transformers and Equipments v. CCE, Jaipur as reported 1965 (9) RLT 175 wherein the Tribunal has taken a view that no confiscation can be done in respect of goods lying within the factory. He submitted that there has been no violation in the present case even in respect of maintenance of the registers.

4. The Learned DR pointed out that the goods having come into existence on 9-11-1992 should have been entered in column 15 of the RG even if they were lying in the finishing room: as column 15 refers to goods having come into existence on manufacture and lying in the finishing room itself, whether they are packed or unpacked, the same should have been entered into column 15 of RG-1 register. He also pointed out to the extract of the RG-1 register to show that the appellants had never shown pending balance, hence an inference can be drawn that there has been clandestine removal in the factory. He also submitted that the confiscation of the goods is sustainable if it is shown that there has been violation of the provisions of excise goods in respect of offending goods. In this connection he relied on the judgment in the case of Shiva Paper Mills Ltd. v. Collector of Central Excise, as reported in 1987 (27) E.L.T. 319 and that of Snack Foods Pvt. Ltd. v.Collector of Central Excise, as reported in 1987 (31) E.L.T. 231. He submitted that unaccounted goods in RG-1 is not a technical breach even if GP1 has been issued and entry in PLA accounted for, as has been held in the case of Indian Cork Mills Ltd. and Ors. v. Collector of Central Excise as reported in 1984 (17) E.L.T. 513. The confiscation of goods in such cases has been held to be valid.

5. I have carefully considered the submissions made by both the sides and have perused the record. In the present case the contention of the appellants is that the goods have not reached RG 1 stage inasmuch as they were still lying in the finishing room. They were required to have been [weighed], sorted out, packed in gunny bags or cartons as the case may be and thereafter the details would be entered in RG-1 register. On this ground, I notice that the column 15 of RG-1 deals about the goods lying in finishing room. The Learned DR is correct in his submissions that the quantity lying in finishing room should have been entered into including the pending balance in column 2. As regards non-entering of balance in column 2, the Learned Consultant submitted that no balance was available as the same was being removed on the same date. If this be so, then the goods of 9-10-1992 were still remaining in factory on 10-11-1992. Hence this plea cannot be accepted. Therefore, it is clear that there has been nonentred [sic] in the RG-1 register in the manner in which it is required to be done. Therefore, the allegation of non-maintenance of registers is upheld and hence I hold that the penalty imposed in this regard is sustainable.

6. As regards confiscation of the goods and imposition of fine is concerned, the Learned Consultant has taken the plea that confiscation of goods lying in finishing room in unpacked condition without having been reached the RG-1 stage is not sustainable. In this regard he has relied on two judgments. He also pointed out from these judgments that for the purpose of confiscation, the department has to show that the assessee has clandestinely removed or attempted to remove the goods.

The Learned DR submitted that it is not necessary to show that there has been any attempt to clandestinely remove the goods but once the entries are not done then that itself is a ground for confiscation.

7. I have carefully considered this plea and have seen the citations noted by both the sides. In the case of Indian Cork Mills Ltd. (supra) relied by the Learned DR, it is noted that the party had already removed the goods and in some cases the party had already loaded the goods in a lorry and was about to remove the goods when the lorry were seized. It was found that the goods were not covered with proper documents and in such circumstances, it was held that confiscation in such a case is proper as there was an attempt for clandestine removal.

In the case of Snack Foods Pvt. Ltd. (supra) the Tribunal has noted about the non-entry of goods in the statutory records, and held that the party is liable for penal action as per Rule 173Q of Central Excise Rules. Further it was held that the party had even admitted about removal of the goods and the seized lorry was loaded with an unaccounted goods, well packed and ready for removal. Hence such goods were held to be confiscable as the assessee had also admitted to have removed those goods in a fully packed condition. In the present case there is no attempt made by the assessee to remove the goods as they were still lying in the finishing room. In that circumstances, applying the ratio of the Western Transformer and Equipment (supra) and Garden Silk Mills, the confiscation and imposition of fine in respect of goods still lying in the finishing room is not sustainable and that portion of the order is set aside. With these modification otherwise the penalty imposed for non-maintaining of the register is upheld.