M/S. Ashoka Dyeing and Finishing Vs. C.C.E., Chandigarh - Court Judgment

Excerpt:
1. the appellants filed this appeal against the order-in-appeal passed by the commissioner (appeals) whereby the appeal filed by the appellants was dismissed.2. brief facts of the case are that the appellants are engaged in the processing of man-made and knitted acrylic fabric. on 13.10.95, the central excise offices visited the factory of the appellants and on verification of the stock it was found that the raw-material 375 mtrs.of man-made grey fabric was found short and man-made fabric weighing 2968 kg. was found in excess to their statutory record. a show cause notice was issued to the appellants for confiscation of man-made fabric found excess and for demand of duty on the goods, found short, and imposing a penalty.3. the adjudicating authority ordered confiscation of 2968 kg. of man-made fabric under rule 173 q of the rules and gave an option to redeem the goods on payment of redemption fine of rs. one lakh. a demand of rs. 2,300/- was confirmed in respect of the goods found short and penalty of rs. 10,000/- was imposed on the appellants.4. ld. counsel, appearing on behalf of the appellants, submits that the goods, found in excess, were purchased by the appellants for the first time which were received in the factory late in the evening on 12.10.95. as the officers of the revenue department reached the factory at 0800 hrs on 13.10.95, these were not entered in their statutory record. the contention of the counsel is that there is no evidence to show that this quantity of fabric had been subjected to any dutiable process in the factory. he, further, contended that when the goods were found in the factory, they were not liable for confiscation under the provisions of rule q of the rules. for this, he relies upon the decision of the tribunal in the case of bhillai conductors (p) ltd. vs c.c.e., raipur 5. in respect of grey fabric found short, he submits that the appellants were processing grey fabric and from this process, the fabric was subjected to shrinkage and no benefit (sic) in respect of shrinkage was given. he, therefore, prays that the appeal be allowed.6. heard ld. d.r., who reiterates the findings of the lower authorities.7. the contention of the appellants in respect of the goods, found in excess, was that they purchased this fabric from the market on 12.10.95 and the goods reached the factory late in the evening. the appellants had not produced any evidence, documentary or otherwise, in respect of this contention. the other contention of the appellants is that the goods were liable for confiscation under rule 173 q of the central excise rules. as the goods were found in the factory, there was no attempt by the appellants to remove the goods without payment of duty.the appellants relies upon the decision of the tribunal in the case of bhillai conductors (p) ltd. (supra). in this case, the hon'ble tribunal held that when the goods were found in excess in the factory and there is no mens rea on the part of the assessee to remove the goods without payment of duty, the goods cannot be confiscated under rule 173 q of the rules and the assessee is liable for penal action under the provisions of rule 226 of the rules. the provisions of rule 226 of the rules also provides for confiscation of the goods which were not accounted in the staturory record and a penalty of rs.2,000/- is provided for this lapse. therefore, if the goods were liable for confiscation under rule 173 q of the rules, the goods are liable for confiscation under rule 226 of the rules. however, taking into consideration the facts and circumstance of the case, the redemption fine of rs. one lakh is reduced to rs.25,000/-.8. in respect of grey fabric, found short, the contention of the appellants is that the grey fabric during the process undergone shrinkage and in respect of this shrinkage no benefit is given. the appellants had not produced any evidence in respect of percentage of shrinkage during the process of man-made grey fabric., nor he has produced any technical literature in respect of this. i, therefore, find no force in the arguments of the appellants. after taking into consideration the facts and circumstances of the case, penalty of rs. 10,000/- is reduced to rs. 2,000/-, otherwise, the impugned order is up-held. the appeal is disposed of as indicated above.

Judgment:
1. The appellants filed this appeal against the order-in-appeal passed by the Commissioner (Appeals) whereby the appeal filed by the appellants was dismissed.

2. Brief facts of the case are that the appellants are engaged in the processing of man-made and knitted acrylic fabric. On 13.10.95, the Central Excise offices visited the factory of the appellants and on verification of the stock it was found that the raw-material 375 mtrs.

of man-made grey fabric was found short and man-made fabric weighing 2968 kg. was found in excess to their statutory record. A show cause notice was issued to the appellants for confiscation of man-made fabric found excess and for demand of duty on the goods, found short, and imposing a penalty.

3. The adjudicating authority ordered confiscation of 2968 kg. of man-made fabric under Rule 173 Q of the Rules and gave an option to redeem the goods on payment of redemption fine of Rs. one lakh. A demand of Rs. 2,300/- was confirmed in respect of the goods found short and penalty of Rs. 10,000/- was imposed on the appellants.

4. Ld. Counsel, appearing on behalf of the appellants, submits that the goods, found in excess, were purchased by the appellants for the first time which were received in the factory late in the evening on 12.10.95. As the officers of the revenue department reached the factory at 0800 hrs on 13.10.95, these were not entered in their statutory record. The contention of the Counsel is that there is no evidence to show that this quantity of fabric had been subjected to any dutiable process in the factory. He, further, contended that when the goods were found in the factory, they were not liable for confiscation under the provisions of Rule Q of the Rules. For this, he relies upon the decision of the Tribunal in the case of Bhillai Conductors (P) Ltd. vs C.C.E., Raipur 5. In respect of grey fabric found short, he submits that the appellants were processing grey fabric and from this process, the fabric was subjected to shrinkage and no benefit (SIC) in respect of shrinkage was given. He, therefore, prays that the appeal be allowed.

6. Heard ld. D.R., who reiterates the findings of the lower authorities.

7. The contention of the appellants in respect of the goods, found in excess, was that they purchased this fabric from the market on 12.10.95 and the goods reached the factory late in the evening. The appellants had not produced any evidence, documentary or otherwise, in respect of this contention. The other contention of the appellants is that the goods were liable for confiscation under Rule 173 Q of the Central Excise Rules. as the goods were found in the factory, there was no attempt by the appellants to remove the goods without payment of duty.

The appellants relies upon the decision of the Tribunal in the case of Bhillai Conductors (P) Ltd. (supra). In this case, the hon'ble Tribunal held that when the goods were found in excess in the factory and there is no mens rea on the part of the assessee to remove the goods without payment of duty, the goods cannot be confiscated under Rule 173 Q of the rules and the assessee is liable for penal action under the provisions of Rule 226 of the Rules. The provisions of Rule 226 of the Rules also provides for confiscation of the goods which were not accounted in the staturory record and a penalty of Rs.2,000/- is provided for this lapse. Therefore, if the goods were liable for confiscation under Rule 173 Q of the Rules, the goods are liable for confiscation under Rule 226 of the Rules. However, taking into consideration the facts and circumstance of the case, the redemption fine of Rs. one lakh is reduced to Rs.25,000/-.

8. In respect of grey fabric, found short, the contention of the appellants is that the grey fabric during the process undergone shrinkage and in respect of this shrinkage no benefit is given. The appellants had not produced any evidence in respect of percentage of shrinkage during the process of man-made grey fabric., nor he has produced any technical literature in respect of this. I, therefore, find no force in the arguments of the appellants. after taking into consideration the facts and circumstances of the case, penalty of Rs. 10,000/- is reduced to Rs. 2,000/-, otherwise, the impugned order is up-held. The appeal is disposed of as indicated above.