M/S. Narendra Products Vs. Cce, Kanpur - Court Judgment

Excerpt:
1. in this appeal, filed by m/s. narendra products, the issue involved is whether penalty is imposable on them under rule 173q of the central excise rules as the amount of duty had been deposited by them even before issue of the show cause notice.2. the appellants have submitted written submissions under letter dated 28.5.2001. they have submitted that the duty of excise amounting to rs.96,000/- involved in respect of 50 bags of 'sarvapriya shankar brand gutkha' cleared from the factory during the period from 19.1.194 to 14.5.94 without payment of duty had been deposited by them even before the issue of show cause notice; that in such a situation penalty is not imposable in view of the following decisions:-siemens ltd. vs. cce, aurangabad (iii) tata engg. & locomotive co. ltd. - vs. cce, patna, 1994 (72) elt 882 (trib.) (iv) sunsilk dyeing & printing mills pvt. ltd. - vs. cce, vadodara, 1999 (105) elt 56 (trib.) (v) bhavani mills limited vs. state of tamil nadu 1994 (94) stc 120 (madras) (vi) state of tamil nadu vs. abirami agencies, 1994 (92) stc 359 (madras) (vii) govt. of india vs. in re: dhampur sugar mills ltd., 1990 (46) elt 400 (gol) 3. countering the arguments, shri ashok mehta, learned sdr, submitted that the appellants manufacture pan masala which is a highly evasion prone commodity; that when the central excise officers paid a surprise visit to their factory premises on 20.5.94 and conducted scrutiny of records they found 12 bilities and 11 courier consignment receipts indicating despatch of 50 bags of branded gutkha valued at rs.1.92 lakhs during the period from 19.1.94 to 14.5.94 which was admitted by shri kailash chand maheswari, authorised signatory, to have been removed without accounting in the statutory records and without payment of duty; that deposit of duty subsequently on 14.11.94 will not absolve them of the liability to penalty as the excisable goods had been removed in contravention of the various provisions of the central excise rules and accordingly penalty is imposable on them under rule 173q(1) of the central excise rules. he also mentioned that deposit of duty subsequent to the detection of clearance of goods without payment of duty by the officers cannot be a circumstances for not imposing penalty on them. he placed reliance on the decision in the case of zunjarra bhikaji nagarkar vs. uoi, 1999 (112) elt 772 (sc) wherein it was held by the apex court that "apart from the offending goods which are liable to confiscation the person concerned with that shall be liable to penalty upto the amount specified in the rule 173q. it is difficult to accept the arguments of the appellants that levy of penalty is discretionary. it is only the amount of penalty which is discretionary." finally he submitted that considering the value of goods removed without payment of duty and the amount of duty involved, penalty of rs.15,000/- imposed by the commissioner is not harsh at all.4. we have considered the submissions of both the sides. the appellants have not disputed the removal of excisable goods during a period of almost four months without accounting the same in the satutory records and without payment of duty. in their reply dated 25.5.1995 to the show cause notice, they had only requested the commissioner to take a lenient view as duty payable had been deposited by them. under self removal procedure, the government has placed a great trust in the manufacturers of good that they would determine the duty liability on the goods to be removed and discharge the duty before actually removing the goods. the appellants has belied the trust reposed in him by removing the (sic) goods (sic) same in the prescribed statutory records and without payment of duty. we agree with the learned sdr that payment of duty after detection of the case cannot take away the guilty intention of the appellant. if no penalty is imposed, this will amount to giving license to commit contravention of the provisions of law. it is not the case of the appellants that it was his consciousness which compelled him to make the payment of duty on his own. the duty would have remained unpaid to the government exchequer had the officers not conducted a surprise check of the records of the appellants. we also observe that evaded duty was not paid by him immediately but almost after six months i.e. 14.11.94, of the visit of their factory by the officers on 20.5.1994. in net plast case, relied upon by the appellants, there was some shortage of inputs and as the appellants reversed the modvat credit to that extent under rule 57f(1), imposition of penalty was not upheld. shortage of some quantity of inputs cannot be compared with the removal of finished goods without payment of duty over a period of four months. in re dhampur sugar mills case, the excisable goods were cleared on 18.5.1987 without payment of duty and the assessee paid the duty on 20.5.87. thus the facts are completely different. similarly facts in telco's case, 1994 (72) elt 882 are different as in that matter the appellants had availed of modvat credit and removed final products without payment of duty to their another unit for captive consumption under notification no. 217/86-ce and they were anticipating that the benefit of said notification would eventually be extended to interplant transfer of goods with retrospective effect. the tribunal felt that the leniency displayed by the collector should go further. there was no case of clandestine removal of goods in telco's case. in sunsilk dyeing case, supra, the order is not a final order but an order disposing of only stay petition. even in abirami agencies case, supra, the sales tax tribunal had set aside the penalty observing that in its monthly return the respondent had reported turnover and remitted the tax due thereon and holding that the failure to post the sales in question in the accounts on the date of inspection did not amount to wilful omission or non-disclosure warranting levy of penalty. the madras high court dismissed the petition filed by the state of tamil nadu holding that it is not necessary that every case of assessment under section 12(2) of the tamil nadu general sales tax act warrants an automatic levy of penalty under section 12(3) of the act and that the question of wilfulness on the part of the dealer in suppressing a particular turnover and whether the dealer was guilty of wilful non-disclosure of particular item of turnover concerned, have got to be considered and decided. applying these test to the facts of the present matter, penalty is to be imposed as the appellants had suppressed the production and clearance of excisable goods for four months; they did not disclose the same as neither entry of production and clearance was made in rg1 register nor the transactions were reflected in monthly returns (rt-12).5. moreover, the apex court has interpreted the provisions of rule 173q in z.b. nagarkar's case, supra, and has held that the word 'liable' has been used in rule 173q which means, as per black's law dictionary, responsible; chargeable, answerable, compellable to make satisfaction, compensation, or restitution.....obligated. the supreme court held that "it is difficult to accept the argument of the appellant that levy of penalty is discretionary. it is only the amount of penalty which is discretionary. both things are necessary: (1) goods are liable to confiscation and (2) persons concerned is liable to penalty." even in cases where mens rea is not present, the supreme court has held in gujarat travencore agency vs. c.i.t., 1989 (42) elt 350 (sc) as under:- "unless there is something in the language of the statute indicating the need to establish the element of mens rea it is generally sufficient to prove that a default in complying with the statute has occurred." 6. in view of this, we hold that penalty is imposable on the appellants. as the penalty imposed is only rs.15,000/- in a case where the duty involved is rs.96,000/-, it is quite reasonable and not harsh at all. accordingly, we do not find any reason to interfere with the impugned order and reject the appeal.

Judgment:
1. In this appeal, filed by M/s. Narendra Products, the issue involved is whether penalty is imposable on them under Rule 173Q of the Central Excise Rules as the amount of duty had been deposited by them even before issue of the show cause notice.

2. The Appellants have submitted written submissions under letter dated 28.5.2001. They have submitted that the duty of Excise amounting to Rs.96,000/- involved in respect of 50 bags of 'Sarvapriya Shankar Brand Gutkha' cleared from the factory during the period from 19.1.194 to 14.5.94 without payment of duty had been deposited by them even before the issue of show cause notice; that in such a situation penalty is not imposable in view of the following decisions:-Siemens Ltd. vs. CCE, Aurangabad (iii) Tata Engg. & Locomotive Co. Ltd. - vs. CCE, Patna, 1994 (72) ELT 882 (Trib.) (iv) Sunsilk Dyeing & Printing Mills Pvt. Ltd. - Vs. CCE, Vadodara, 1999 (105) ELT 56 (Trib.) (v) Bhavani Mills Limited vs. State of Tamil Nadu 1994 (94) STC 120 (Madras) (vi) State of Tamil Nadu vs. Abirami Agencies, 1994 (92) STC 359 (Madras) (vii) Govt. of India vs. In Re: Dhampur Sugar Mills Ltd., 1990 (46) ELT 400 (GOL) 3. Countering the arguments, Shri Ashok Mehta, learned SDR, submitted that the Appellants manufacture Pan Masala which is a highly evasion prone commodity; that when the Central Excise Officers paid a surprise visit to their factory premises on 20.5.94 and conducted scrutiny of records they found 12 bilities and 11 courier consignment receipts indicating despatch of 50 bags of branded Gutkha valued at Rs.1.92 lakhs during the period from 19.1.94 to 14.5.94 which was admitted by Shri Kailash Chand Maheswari, Authorised Signatory, to have been removed without accounting in the statutory records and without payment of duty; that deposit of duty subsequently on 14.11.94 will not absolve them of the liability to penalty as the excisable goods had been removed in contravention of the various provisions of the Central Excise Rules and accordingly penalty is imposable on them under Rule 173Q(1) of the Central Excise Rules. He also mentioned that deposit of duty subsequent to the detection of clearance of goods without payment of duty by the officers cannot be a circumstances for not imposing penalty on them. He placed reliance on the decision in the case of Zunjarra Bhikaji Nagarkar vs. UOI, 1999 (112) ELT 772 (SC) wherein it was held by the Apex Court that "apart from the offending goods which are liable to confiscation the person concerned with that shall be liable to penalty upto the amount specified in the Rule 173Q. It is difficult to accept the arguments of the appellants that levy of penalty is discretionary. It is only the amount of penalty which is discretionary." Finally he submitted that considering the value of goods removed without payment of duty and the amount of duty involved, penalty of Rs.15,000/- imposed by the Commissioner is not harsh at all.

4. We have considered the submissions of both the sides. The Appellants have not disputed the removal of excisable goods during a period of almost four months without accounting the same in the satutory records and without payment of duty. In their reply dated 25.5.1995 to the show cause notice, they had only requested the Commissioner to take a lenient view as duty payable had been deposited by them. Under Self Removal Procedure, the Government has placed a great trust in the manufacturers of good that they would determine the duty liability on the goods to be removed and discharge the duty before actually removing the goods. The Appellants has belied the trust reposed in him by removing the (SIC) goods (SIC) same in the prescribed statutory records and without payment of duty. We agree with the learned SDR that payment of duty after detection of the case cannot take away the guilty intention of the Appellant. If no penalty is imposed, this will amount to giving license to commit contravention of the provisions of law. It is not the case of the Appellants that it was his consciousness which compelled him to make the payment of duty on his own. The duty would have remained unpaid to the Government Exchequer had the officers not conducted a surprise check of the records of the Appellants. We also observe that evaded duty was not paid by him immediately but almost after six months i.e. 14.11.94, of the visit of their factory by the officers on 20.5.1994. In Net Plast case, relied upon by the Appellants, there was some shortage of inputs and as the Appellants reversed the Modvat Credit to that extent under Rule 57F(1), imposition of penalty was not upheld. Shortage of some quantity of inputs cannot be compared with the removal of finished goods without payment of duty over a period of four months. In Re Dhampur Sugar Mills case, the excisable goods were cleared on 18.5.1987 without payment of duty and the assessee paid the duty on 20.5.87. Thus the facts are completely different. Similarly facts in TELCO's case, 1994 (72) ELT 882 are different as in that matter the Appellants had availed of Modvat Credit and removed final products without payment of duty to their another unit for captive consumption under Notification No. 217/86-CE and they were anticipating that the benefit of said Notification would eventually be extended to interplant transfer of goods with retrospective effect. The Tribunal felt that the leniency displayed by the Collector should go further. There was no case of clandestine removal of goods in TELCO's case. In Sunsilk Dyeing case, supra, the Order is not a final Order but an order disposing of only stay petition. Even in Abirami Agencies case, supra, the Sales Tax Tribunal had set aside the penalty observing that in its monthly return the respondent had reported turnover and remitted the tax due thereon and holding that the failure to post the sales in question in the accounts on the date of inspection did not amount to wilful omission or non-disclosure warranting levy of penalty. The Madras High Court dismissed the petition filed by the State of Tamil Nadu holding that it is not necessary that every case of assessment under Section 12(2) of the Tamil Nadu General Sales Tax Act warrants an automatic levy of penalty under Section 12(3) of the Act and that the question of wilfulness on the part of the dealer in suppressing a particular turnover and whether the dealer was guilty of wilful non-disclosure of particular item of turnover concerned, have got to be considered and decided. Applying these test to the facts of the present matter, penalty is to be imposed as the Appellants had suppressed the production and clearance of excisable goods for four months; they did not disclose the same as neither entry of production and clearance was made in RG1 Register nor the transactions were reflected in Monthly Returns (RT-12).

5. Moreover, the Apex Court has interpreted the provisions of Rule 173Q in Z.B. Nagarkar's case, supra, and has held that the word 'liable' has been used in Rule 173Q which means, as per Black's Law Dictionary, responsible; chargeable, answerable, compellable to make satisfaction, compensation, or restitution.....Obligated. The Supreme Court held that "It is difficult to accept the argument of the appellant that levy of penalty is discretionary. It is only the amount of penalty which is discretionary. Both things are necessary: (1) goods are liable to confiscation and (2) persons concerned is liable to penalty." Even in cases where mens rea is not present, the Supreme Court has held in Gujarat Travencore Agency vs. C.I.T., 1989 (42) ELT 350 (SC) as under:- "Unless there is something in the language of the statute indicating the need to establish the element of mens rea it is generally sufficient to prove that a default in complying with the statute has occurred." 6. In view of this, we hold that penalty is imposable on the Appellants. As the penalty imposed is only Rs.15,000/- in a case where the duty involved is Rs.96,000/-, it is quite reasonable and not harsh at all. Accordingly, we do not find any reason to interfere with the impugned Order and reject the appeal.