Jitendra Agarwal and Kay Cee Vs. Commr. of C. Ex. - Court Judgment

Excerpt:
1. these two appeals have arisen from the same order passed by the commissioner of central excise (appeals) on the same set of facts. the two appeals are, therefore, being disposed of by a common order. the facts of the case are briefly stated below :- 2. the appellants in appeal no. e/638/99-nb were engaged in the manufacture of copper wire rod and copper strips falling under chapter 74 of the schedule to the central excise tariff act, 1985 during the relevant period. they were also working under the modvat scheme. while so, on 25-6-1997, the preventive officers of the central excise department visited the appellant's factory by surprise and conducted physical verification of the stock of the finished goods as well as the raw materials. they found a quantity of 4264.25 kgs. of copper.....

Judgment:
1. These two Appeals have arisen from the same order passed by the Commissioner of Central Excise (Appeals) on the same set of facts. The two Appeals are, therefore, being disposed of by a common order. The facts of the case are briefly stated below :- 2. The appellants in Appeal No. E/638/99-NB were engaged in the manufacture of Copper wire Rod and Copper Strips falling under Chapter 74 of the schedule to the Central Excise Tariff Act, 1985 during the relevant period. They were also working under the Modvat Scheme. While so, on 25-6-1997, the Preventive Officers of the Central Excise Department visited the appellant's factory by surprise and conducted physical verification of the stock of the finished goods as well as the raw materials. They found a quantity of 4264.25 Kgs. of Copper Wire bar (raw material) in excess over and above the recorded stock of the raw material. This quantity of the goods was of a value of around Rs. 5 Lakhs, involving Central Excise Duty amounting to around Rs. 76,000/-.

The Central Excise Officers scrutinised the statutory records produced by Shri Jitender Agarwal (Partner of the appellant-firm) and also took his statement. Subsequently, they got the samples of the goods tested in a laboratory and found the goods to be refined copper wire bars.

Statement of the afore-named partner of the firm was again recorded on 27-6-1997, but the same was not satisfactory to the Central Excise Officers, who believed that the goods were liable to confiscation.

Accordingly, the aforesaid quantity of goods was seized under Section 110 of the Customs Act, 1962 as made applicable to like matters under the Central Excise Act. The seized goods were, however, provisionally released to the party on execution of appropriate bond and production of Bank Guarantee. Subsequently, the appellants and the afore-named Shri Jitender Agarwal were directed by the Department, in the show cause notices issued to them, to show cause why the seized copper wire bars should not be confiscated under Rule 173Q of the Central Excise Rules, why Central Excise duty amounting to Rs. 76,757/- allegedly leviable on the said goods should not be demanded under Rule 9(2) of the Rules ibid, why penalty should not be imposed on the appellant-firm under Rule 173Q and on the Partner, Shri Jitender Agarwal under Rule 209 A. Both the firm and the partner contested the show cause notice by way of their written submissions. Eventually, the matter was adjudicated by the jurisdictional Assistant Commissioner of Central Excise who ordered confiscation of the seized goods under Rules 173 Q, giving an option to redeem the same on payment of a redemption fine of Rs. 1.25 Lakhs alongwith Central Excise duty of Rs. 76,756.50. The adjudicating authority further imposed a penalty of Rs. 75,000/- on the firm under Rule 173Q and separate penalty of Rs. 75,000/- on the partner (Shri Jitender Agarwal) under Section 209 A of the Central Excise Rules. The firm and the partner preferred seperate appeals against the order of adjudication before the Commissioner of Central Excise [Appeals] who passed a common order in the 2 appeals before him.

Hence Appeal No. C/638/99-NB by the firm and Appeal No. E/635/99 NB by the partner, Shri Jitender Agarwal before the Tribunal.

2. I have carefully examined the impugned order as well as the order of the adjudicating authority and connected records of the case. I have also heard the ld. Advocate Shri Navin Mullick for the appellants and the ld. JDR Shri T.A. Arunachalam for the respondent-Revenue. The ld.Advocate has put forward the arguments summarized below:- 1. The adjudication of the dispute was beyond the scope of the show-cause notice as much as the provisions of Rules 51 A and 173H relied on by the adjudicating authority were not even mentioned in the show cause notice.

2. The seized goods were the raw-materials received in the appellants factory only on 24-6-1997 and were kept there for the purpose of manufacturing their finished products (copper wire rods and copper wire strips) after proper accountal and the same had already suffered Central Excise Duty and hence were no longer 'excisable goods' coming within the meaning of Section 2 (d) of the Central Excise Act and hence were not liable to confiscation.

3. There is no statutory requirement of making entry of particulars of principal raw-materials soon after receipt thereof in the factory. What was contemplated by the scheme of Central Excise provisions was that such entries should be made prior to their utilization in the manufacturing process.

4. The Lower Appellate Authority, after having vacated the demand of duty on the raw-materials in question, found the confiscation in order without stating any reasons for such finding. To this extent, the impugned order is not a speaking order and hence liable to be set aside on this sole ground.

5. As regards the appellant in appeal No. 635, there is no finding whatsoever in the impugned order as to why any penalty should be imposed on him.

3. The ld. Advocate, arguing on the point that the seized goods were already duty-paid and hence no longer excisable, has drawn my attention to the decision of the Hon'ble Delhi High Court in the case of Sulekh Ram and Sons v. Union of India -1978 E.L.T. J525, wherein the High Court held that goods procured from the market should be deemed to be duty-paid. It is the contention of the appellants that they were manufacturing the finished products on their own as well as on job work basis. Therefore, the seized goods could not have been treated as goods which had not suffered duty. The ld. Advocate has pointed out that the only allegation in the show cause notice was to the effect that the seized goods were not covered by any invoice, bill etc. and were kept in the factory without proper accountal for the manufacture of finished goods for their clandestine removal without payment of Central Excise Duty. It was on the finding of non-accountal with intent to remove the goods clandestinely without payment of duty that the adjudicating authority ordered confiscation of the goods and imposed penalty on the parties, argues the ld. Advocate. He further submits that, the demand of Central Excise having been vacated by the lower appellate authority, any finding of intention for clandestine removal without payment of duty would have no legs to stand on. To this extent, any room for confiscation of the goods would become too narrow. Consequently, the order of imposition of penalty would also be found to be bereft of any base. Opposing these submissions, the ld. JDR has reiterated the findings and observations as contained in the orders of the lower authorities. He has submitted that the goods in question found in the appellant's factory on 25-6-1997 ought to have been properly covered by Invoices and accounted for in Form IV register. However, in answer to the query from the Bench as to whether it is a mandatory requirement for the party to make entries regarding the raw-materials soon after the goods are received in the factory and not later on, the ld. JDR has referred to the Provisions of Rule 173G (4) (a) and submitted that, under these Provisions, it is necessary that the entries regarding the raw-materials be entered in Form IV Register soon after the receipt of the said goods. I have perused the Provisions cited by the ld. JDR but I have not been able to find the necessary nexus between these provisions and the Form IV Register referred to in this case.

4. The ld. JDR, further submits that the seizure of the goods was made under Section 110 of the Customs Act on the basis of the reasonable belief that the said goods were liable to confiscation under Rule 173 Q of the Central Excise Rules. However, no fact constituting such reasonable belief is forthcoming either from the records or from the arguments put across before me today. However, the mere allegation that the goods in question were kept in the appellant's factory for the purpose of clandestine removal without payment of duty, cannot, in my view, constitute any reasonable belief for seizure of the goods. It is the further submission of the JDR that, under Rule 173H, it was mandatory for the factory to explain the licit character of the goods by way of proper duty paying documents. I have considered the rival submissions. The issue before the Tribunal at present is whether the non-accountal of the goods in question in the Form IV Register and the factum of the goods not having been covered by any invoice would suffice for the purpose of confiscation of the goods under Rule 173Q of the Central Excise Rules and whether the omission to do so on the part of the party would call for imposition of penalty to the extent the lower authorities did by way of their respective orders. Having examined the facts and circumstances of the case, I held the view that there was no justification for confiscation of the goods and imposition of penalty on the appellants in the brief circumstances as stated in the show cause notice and I hold that the facts and circumstances set forth in the show cause notice would not suffice for such an order of imposition of penalty and confiscation of the goods. To that extent, the order of confiscation and imposition of penalty is beyong the scope of the show cause notice itself. Further the ld. Commissioner (Appeals) has upheld the order of confiscation and imposition of penalty on the parties without stating any reasons for the same.

6. In the light of the above discussion, the appeals are only liable to be allowed. Therefore, the order of the lower appellate authority is set aside and the appeals are allowed with consequential benefits to the respective appellants.