Moon Light Printer and Paper Vs. Commr. of C. Ex. - Court Judgment

Excerpt:
1. the appellants herein are engaged in the manufacture of wax coated paper with central excise registration. the officers of the directorate general of anti-evasion visited the appellants' factory on 28-11-1996 and carried out a surprise check of the stock of finished products and raw materials. they found the following excess and shortages : (i) wax coated paper - excess of 1768 kgs. over the (final product) recorded balance in rg 1 register (ii) td plain paper - excess of 5147 kgs. over the (raw material) recorded balance in rg 23a pt. i register (iii) plain poly film - excess of 1247 kgs. over (raw material) recorded balance in rg 23a pt. i register (iv) kraft paper - shortage of 6038 kgs. vis-a- (raw material) vis recorded balance in rg 23a pt. i register 2. the officers also searched the residential premises of shri rajesh rustagi, partner of the appellants' firm on the same day and seized indian currency amounting to rs. 2.5 lakhs on the basis of a belief that the said amount was the sale proceeds of clandestinely removed excisable products from the appellants' factory. the stock of finished product and raw materials found in excess as above were also seized by the officers on the basis of similar belief. statement of the aforenamed rajesh rustagi and also that of shri vijay kumar gupta, accountant of the appellants' firm, were also taken by the officers. on the basis of the materials on record, the department by show cause notice proposed to confiscate the seized goods and currency and imposed penalties on the firm and its partner for alleged violation of central excise rules. the appellants contested the proposed action of the department by way of their reply to the show cause notice. the jurisdictional deputy commissioner of central excise, who adjudicated the dispute, confirmed the demand of duty of rs. 41,213/- on the alleged clearance of finished product allegedly manufactured form 6038 kgs. of kraft paper found short as above; imposed a penalty of rs. 41,000/- on the appellant under section 11 ac of central excise act and another penalty of rs. 7 lakhs on them under rule 173q and rule 226 of the central excise rules; confiscated the seized goods with option to redeem the same on payment of a fine of rs. 3 lakhs as well as on payment of duty leviable thereon; confiscated the currency of rs. 2.5 lakhs and imposed a penalty of rs. 5,000/- on the partner, shri rajesh rustagi under rule 209a of the central excise rules. the assessee aggrieved by this order of adjudication, preferred appeal to the commissioner (appeals), and the latter passed order dated 21-7-1999, which is under challenge in the captioned appeal. the commissioner (appeals) by the impugned order, affirmed the imposition of penalty of rs. 41,000/- under section 11ac of the act, but reduced the redemption fine to rs. 75,000/- and the penalty under rules 173q and 226 to rs. 50,000/-. the lower appellate authority, further, vacated the confiscation of the currency, while upholding the imposition of personal penalty on the partner. hence, this appeal.3. i have heard shri v. swaminathan, learned advocate and shri m.d.singh, learned sdr and perused the records.4. i note that at the instance of the appellants, stock verification was carried out once again on 4-4-1997 and the earlier physical verification of the stock was found to be correct. further, shri rajesh rustagi, in his statement dated 11-4-1997 has himself admitted that 6038 kgs. of kraft paper found short had been consumed in the manufacture of wax coated paper which was clandestinely removed without payment of duty and excise duty of rs. 41,213/- was also voluntarily paid by him on this count. his statement has not been retracted.therefore, duty liability of the above amount has been rightly confirmed and penalty of rs. 41,000/- imposed under section 11ac is also sustainable. as regards goods found in excess, they are in the nature of raw materials on which the appellants were availing input credit. it was, therefore, their responsibility to properly account for all the raw materials received by them in the factory in the rg 23a part i or form iv register. the charge of the department is not only based upon non-accountal but also upon the statement of rajesh rustagi who had admitted clearance of final products (wax coated paper) without payment of duty. therefore, the case law relied upon by the learned counsel viz. decisions of the tribunal in the case of m/s. threads india pvt. ltd. v. commissioner of central excise, kanpur reported in 2000 (117) e.l.t. 644, and m/s. premier packaging pvt. ltd. v.collector of central excise, new delhi reported in 1986 (26) e.l.t. 333 are distinguishable. if therefore, uphold the confiscation of the seized excess goods. the redemption fine and penalty are not excessive, having regard to the value of the goods i.e. rs. 3,32,613/- and having regard to the fact that both redemption fine and penalty stood reduced by the lower appellate authority.

Judgment:
1. The appellants herein are engaged in the manufacture of wax coated paper with Central Excise registration. The officers of the Directorate General of Anti-evasion visited the appellants' factory on 28-11-1996 and carried out a surprise check of the stock of finished products and raw materials. They found the following excess and shortages : (i) Wax coated paper - Excess of 1768 kgs. over the (final product) recorded balance in RG 1 register (ii) TD plain paper - Excess of 5147 kgs. over the (raw material) recorded balance in RG 23A Pt. I register (iii) Plain poly film - Excess of 1247 kgs. over (raw material) recorded balance in RG 23A Pt. I register (iv) Kraft paper - Shortage of 6038 kgs. vis-a- (raw material) vis recorded balance in RG 23A Pt. I register 2. The officers also searched the residential premises of Shri Rajesh Rustagi, Partner of the appellants' firm on the same day and seized Indian currency amounting to Rs. 2.5 lakhs on the basis of a belief that the said amount was the sale proceeds of clandestinely removed excisable products from the appellants' factory. The stock of finished product and raw materials found in excess as above were also seized by the officers on the basis of similar belief. Statement of the aforenamed Rajesh Rustagi and also that of Shri Vijay Kumar Gupta, Accountant of the appellants' firm, were also taken by the officers. On the basis of the materials on record, the Department by show cause notice proposed to confiscate the seized goods and currency and imposed penalties on the firm and its partner for alleged violation of Central Excise Rules. The appellants contested the proposed action of the Department by way of their reply to the show cause notice. The jurisdictional Deputy Commissioner of Central Excise, who adjudicated the dispute, confirmed the demand of duty of Rs. 41,213/- on the alleged clearance of finished product allegedly manufactured form 6038 kgs. of kraft paper found short as above; imposed a penalty of Rs. 41,000/- on the appellant under Section 11 AC of Central Excise Act and Another penalty of Rs. 7 lakhs on them under Rule 173Q and Rule 226 of the Central Excise Rules; confiscated the seized goods with option to redeem the same on payment of a fine of Rs. 3 lakhs as well as on payment of duty leviable thereon; confiscated the currency of Rs. 2.5 lakhs and imposed a penalty of Rs. 5,000/- on the partner, Shri Rajesh Rustagi under Rule 209A of the Central Excise Rules. The assessee aggrieved by this order of adjudication, preferred appeal to the Commissioner (Appeals), and the latter passed order dated 21-7-1999, which is under challenge in the captioned appeal. The Commissioner (Appeals) by the impugned order, affirmed the imposition of penalty of Rs. 41,000/- under Section 11AC of the Act, but reduced the redemption fine to Rs. 75,000/- and the penalty under Rules 173Q and 226 to Rs. 50,000/-. The lower appellate authority, further, vacated the confiscation of the currency, while upholding the imposition of personal penalty on the partner. Hence, this appeal.

3. I have heard Shri V. Swaminathan, learned Advocate and Shri M.D.Singh, learned SDR and perused the records.

4. I note that at the instance of the appellants, stock verification was carried out once again on 4-4-1997 and the earlier physical verification of the stock was found to be correct. Further, Shri Rajesh Rustagi, in his statement dated 11-4-1997 has himself admitted that 6038 kgs. of kraft paper found short had been consumed in the manufacture of wax coated paper which was clandestinely removed without payment of duty and excise duty of Rs. 41,213/- was also voluntarily paid by him on this count. His statement has not been retracted.

Therefore, duty liability of the above amount has been rightly confirmed and penalty of Rs. 41,000/- imposed under Section 11AC is also sustainable. As regards goods found in excess, they are in the nature of raw materials on which the appellants were availing input credit. It was, therefore, their responsibility to properly account for all the raw materials received by them in the factory in the RG 23A Part I or Form IV register. The charge of the Department is not only based upon non-accountal but also upon the statement of Rajesh Rustagi who had admitted clearance of final products (wax coated paper) without payment of duty. Therefore, the case law relied upon by the learned Counsel viz. decisions of the Tribunal in the case of M/s. Threads India Pvt. Ltd. v. Commissioner of Central Excise, Kanpur reported in 2000 (117) E.L.T. 644, and M/s. Premier Packaging Pvt. Ltd. v.Collector of Central Excise, New Delhi reported in 1986 (26) E.L.T. 333 are distinguishable. If therefore, uphold the confiscation of the seized excess goods. The redemption fine and penalty are not excessive, having regard to the value of the goods i.e. Rs. 3,32,613/- and having regard to the fact that both redemption fine and penalty stood reduced by the lower appellate authority.