Woodburn Chemicals (P) Ltd. Vs. Commissioner of C. Ex. - Court Judgment

Excerpt:
1. these are four stay applications filed by the above mentioned applicants praying for dispensing with pre-deposit of the duty and penalty amounts confirmed against them by the commissioner of central excise, kanpur by his order dated 28-11-1997.2. m/s. woodburn chemicals (p) ltd. were called upon to show cause why duty should not be demanded from them for removal of excisable goods without payment of appropriate duty of excise and why penalty should not be imposed on them for contravention of rules 9(1), 173f and 173g of the central excise rules, 1944 read with rule 173q.3. m/s. woodburn chemicals (p) ltd. are engaged in the manufacture of basic chromium sulphate and sodium sulphate falling under chapter heading 2833.00. m/s. s.c. manufacturers (scm) and m/s. sphenex industries (sii) are also engaged in the manufacture of the same items.all the three units were operating from adjoining plots in industrial area at unnao. shri d.s. sodhi, the other applicant for stay is the managing director of m/s. woodburn chemicals (p) ltd. (wcpl). he is also proprietor/partner of the other two manufacturers. on the basis of intelligence reports, a truck coming from the factory gate of m/s.woodburn chemicals (p) ltd. was intercepted and on examination it was found to contain 300 bags of basic chromium sulphate. on detailed examination four different kinds of markings were found on these bags which showed that the same excisable goods were packed in gunny bags showing that they were manufactured by wcpl, scm and sh on examination of the rg 23a part i accounts of the three units, it was found that the accounts relating to one of the major raw materials for production of basic chromium sulphate, namely, soda ash, was not upto-date in the case of any of the three units. on the basis of statements recorded from authorised signatories of wcpl and the other two units, the department alleged that the applicants were wrongly availing the benefit of ssi notification no. 1/93. the matter was adjudicated by the commissioner who held against the applicants and ordered confiscation of seized goods and imposition of various penalties.3. appearing for the applicants shri g.s. murthy, ld. advocate sub-mitted that all the three units were ssi units and the allegation against them was that they had, in contravention of paragraph 7 of exemption notification 1/93, availed the concessional rate of duty. he submitted that the classification list filed by the applicants had been approved by the asstt. collector. once the classification list was accepted by the proper officer, no demand could be made or confirmed or penalty imposed unless the classification list containing the declaration had been revoked by a subsequent order. he relied on the hon'ble supreme court decision in the case of bhiwani textile mills as reported in 1996 (88) e.l.t. 639 and the tribunal decision in the case of sun beam engineering works v. cce as reported in 1997 (96) e.l.t.714 in support. he also pleaded financial hardship on the part of the applicants and referred to the balance sheet of the three units filed along with the stay application.4. shri sanjeev srivastava, ld. jdr opposing the stay application submitted that though for reopening classification list approved earlier notice under section 11a may be required, for contravention of the provisions of rule 9(1) and for clandestine removal, the department could always invoke the provisions of section 11 a. he relied on the hon'ble supreme court decision in the case of elson machines v. uoi reported in 1988 (38) e.l.t. 571. he also submitted that the decision cited by ld. counsel viz. in madhumilan case has not overruled the earlier decision of the apex court in elson machines.5. we have considered the submissions. we find that both the sides have relied on the apex court decisions in support of their contentions. to arrive at a correct decision, detailed examination as to their applicability to the facts of the case will be necessary. further, on the facts of the case, we are not in a position to accept the submission made on behalf of the applicants that the shortages observed in the raw material account had occurred entirely due to inadvertant mixing up of the goods by their employees. it is also seen that the three units are located in adjoining plots and are closely inter-linked by way of common management and involvement of shri d.s. sodhi who had been associated with all the three units in one capacity or other.since for taking even a prima facie view in the case, detailed examination of the facts are required which is not possible at this stage, the appeals appear to be arguable. having regard to the above and other relevant factors, we direct the four applicants to pre-deposit the following amounts : 6. the four applicants shall deposit the aforesaid amounts on or before 25-6-1998. on deposit of the said amounts, demands/recovery of the balance amounts shall remain stayed till the disposal of the appeals by this tribunal.7. failure to comply with the above directions by any of the applicants would make his/their appeal liable to be dismissed without further notice.

Judgment:
1. These are four stay applications filed by the above mentioned applicants praying for dispensing with pre-deposit of the duty and penalty amounts confirmed against them by the Commissioner of Central Excise, Kanpur by his order dated 28-11-1997.

2. M/s. Woodburn Chemicals (P) Ltd. were called upon to show cause why duty should not be demanded from them for removal of excisable goods without payment of appropriate duty of excise and why penalty should not be imposed on them for contravention of Rules 9(1), 173F and 173G of the Central Excise Rules, 1944 read with Rule 173Q.3. M/s. Woodburn Chemicals (P) Ltd. are engaged in the manufacture of basic Chromium Sulphate and Sodium Sulphate falling under Chapter Heading 2833.00. M/s. S.C. Manufacturers (SCM) and M/s. Sphenex Industries (SII) are also engaged in the manufacture of the same items.

All the three units were operating from adjoining plots in industrial area at Unnao. Shri D.S. Sodhi, the other applicant for stay is the Managing Director of M/s. Woodburn Chemicals (P) Ltd. (WCPL). He is also proprietor/partner of the other two manufacturers. On the basis of intelligence reports, a truck coming from the factory gate of M/s.

Woodburn Chemicals (P) Ltd. was intercepted and on examination it was found to contain 300 bags of Basic Chromium Sulphate. On detailed examination four different kinds of markings were found on these bags which showed that the same excisable goods were packed in gunny bags showing that they were manufactured by WCPL, SCM and SH On examination of the RG 23A Part I accounts of the three units, it was found that the accounts relating to one of the major raw materials for production of basic chromium sulphate, namely, Soda ash, was not upto-date in the case of any of the three units. On the basis of statements recorded from authorised signatories of WCPL and the other two units, the Department alleged that the applicants were wrongly availing the benefit of SSI Notification No. 1/93. The matter was adjudicated by the Commissioner who held against the applicants and ordered confiscation of seized goods and imposition of various penalties.

3. Appearing for the applicants Shri G.S. Murthy, ld. Advocate sub-mitted that all the three units were SSI units and the allegation against them was that they had, in contravention of paragraph 7 of exemption Notification 1/93, availed the concessional rate of duty. He submitted that the classification list filed by the applicants had been approved by the Asstt. Collector. Once the classification list was accepted by the proper officer, no demand could be made or confirmed or penalty imposed unless the classification list containing the declaration had been revoked by a subsequent order. He relied on the Hon'ble Supreme Court decision in the case of Bhiwani Textile Mills as reported in 1996 (88) E.L.T. 639 and the Tribunal decision in the case of Sun Beam Engineering Works v. CCE as reported in 1997 (96) E.L.T.714 in support. He also pleaded financial hardship on the part of the applicants and referred to the balance sheet of the three units filed along with the stay application.

4. Shri Sanjeev Srivastava, ld. JDR opposing the stay application submitted that though for reopening classification list approved earlier notice under Section 11A may be required, for contravention of the provisions of Rule 9(1) and for clandestine removal, the department could always invoke the provisions of Section 11 A. He relied on the Hon'ble Supreme Court decision in the case of Elson Machines v. UOI reported in 1988 (38) E.L.T. 571. He also submitted that the decision cited by ld. Counsel viz. in Madhumilan case has not overruled the earlier decision of the Apex Court in Elson Machines.

5. We have considered the submissions. We find that both the sides have relied on the Apex Court decisions in support of their contentions. To arrive at a correct decision, detailed examination as to their applicability to the facts of the case will be necessary. Further, on the facts of the case, we are not in a position to accept the submission made on behalf of the applicants that the shortages observed in the raw material account had occurred entirely due to inadvertant mixing up of the goods by their employees. It is also seen that the three units are located in adjoining plots and are closely inter-linked by way of common management and involvement of Shri D.S. Sodhi who had been associated with all the three units in one capacity or other.

Since for taking even a prima facie view in the case, detailed examination of the facts are required which is not possible at this stage, the appeals appear to be arguable. Having regard to the above and other relevant factors, we direct the four applicants to pre-deposit the following amounts : 6. The four applicants shall deposit the aforesaid amounts on or before 25-6-1998. On deposit of the said amounts, demands/recovery of the balance amounts shall remain stayed till the disposal of the appeals by this Tribunal.

7. Failure to comply with the above directions by any of the applicants would make his/their appeal liable to be dismissed without further notice.