ORDER
V.K. Agrawal, Member (T)
1. These are five appeals arising out of a common Order-in-Original No. 691/2001, dated 4.12.2001 passed by the Commissioner, Central Excise.
2. Shri L.P. Asthana, learned Advocate, submitted that M/s. Sarti Ispat Udyog manufacture iron and steel products; that on 8.6.96, Central Excise Officers intercepted a truck No. MP 23 15 7024 carrying CTD Bars weighing 13.390 MT valued at Rs. 1,72,731 at R.T.O. Check Post, Chincola; that driver, Harjinder Singh informed the Officers that the CTD Bars were loaded from the Appellant No. 1’s premises; that the Officers seized both the goods and Truck as the goods were removed from the factory premises without payment of duty; that the search of the factory premises of the Appellant No. 1, revealed
(i) Shortage of CTD Bars 77.633 MT
(ii) Excess of 2.235 MT Rounds, 31.316 MT of Ribbed Bars and 2.804 MT of M.S. angles;
(iii) Shortage of 167.616 MT of Modvatable inputs viz., Bloom, cutting of bloom, slabs, billets, ingots, plate cuttings, etc.
He, further, submitted that the Commissioner under the impugned Order confiscated the CTD bars seized from the Truck and goods found in excess in the factory premises with option to redeem the same on payment of fine; confirmed the demand of duty of Rs. 25,910 in respect of CTD bars seized from the Truck and duty of Rs. 2,71,585 in respect of rolled products manufactured and cleared without payment of duty; disallowed Modvat Credit of Rs. 2,03,318 on the inputs found short; imposed penalties on all the Appellants and confiscated the Truck with an option to redeem the same on payment of redemption fine.
3. The learned Counsel, further, submitted that the shortage and excess found in the stocks of inputs and finished goods is not based on any actual weighment of goods but the verification was partly on eye estimation basis and partly on hypothetical basis since it was a result of some calculations and deprivations based on average; that such calculation cannot be relied upon by the Department; that CTD Bars seized from the Truck were duly accounted for in the RG-1 Register and as such there was no malafide intention on their part to clear the goods without payment of duty; that the mistake of non-preparing invoice and not debiting duty occurred due to the fact that Executive Director had to leave the factory just before the removal on account of some urgent work and he could not give proper instruction to the employees for preparation of invoice and debiting of duty and the goods were urgently required by M/s. Shri Venkatesh Steel Traders for supplying to their customers; that the Department should take a flexible view particularly when the duty involved had been deposited as per the demand made.
4. He also mentioned that ribbed bars are their intermediate products and not the final products; that rounds are also CTD rounds and are accounted for against CTD Bars only; that ribbed bars and rounds are not accounted for nor marketed separately and are accounted for and sold as CTD bars only; that hence excess of these products be set-off against the shortage of CTD Bars. He, further, mentioned that the Department has converted the shortage of 167.616 MT of raw materials into 160.99 MT of finished products and had treated the same as removed clandestinely without payment of duty without any evidence of manufacture and production; that once the duty of excise has been demanded by converting shortage of inputs into finished products, the Department cannot disallow the MODVAT Credit on such inputs. He also contended that the raw material would also be contained in the in-process material and as such raw material was not short. He also contended that as the excess goods were within the factory, their confiscation is not permissible under Rule 173Q of the Central Excise Rules, 1944; that no penalty can be imposed under Section 11AC of the Central Excise and no interest can be demanded under Section 11AB of the Act as the stock verification took place on 8.6.96 and 9.6.96 which is before the date on which these Sections came into force.
5. The learned Advocate also submitted that no penalty is imposable on Sohan Lal Singhania, Executive Director, as he had never admitted that he was involved in any clandestine removal of goods from the factory; that non-preparation of the invoice was due to a human error only and there was no mala fide intention; that no penalty is imposable on M/s. Venkatesh Steel Traders under Rule 209A of the Central Excise Rules, 1944 as there is no evidence on record for the finding that they aided and abetted the evasion of duty; that M/s. Sai Freight Carrier are engaged in the transportation of goods; that they were transporting CTD Bars on the basis of documents provided to them and did not have knowledge regarding the liability to confiscation of the seized goods; that in these circumstances Rule 209A is not attracted; that Shri Ratan Singh, owner of the Truck, was not in any way involved in removal of the goods from the factory; that penalty under Rule 209A cannot be imposed upon him since he has neither dealt with the goods nor had knowledge regarding the liability to confiscation.
6. Countering the arguments, Shri U. Raja Ram, learned DR, submitted that there is no dispute about the fact that the CTD Bars seized from the Truck were cleared without payment of Central Excise duty and without the cover of invoice; that this fact has been admitted by Shri Lalit Kumar Singhania, Managing Director in his statement dated 8.6.96 as he agreed to pay duty thereon; that Shri Sohan Lai Singhania, Executive Director, has also admitted this fact in his statement dated 9.6.96. Regarding shortage of inputs, the learned DR submitted that it is evident from para 8 of the show cause notice dated 6.12.96 that the shortage was considered after taking into account the inputs issued on 8.6.96 for use in manufacture; that the Executive Director has admitted the excess and shortage of finished goods and shortage of raw material ascertained during stock verification, in his statement; that he had also expressed his full satisfaction with the manner of stock verification. He also mentioned that Venkatesh Steel Trader has aided and abetted the evasion of duty as they had given their bill book to the Appellant No. 1, that as truck was transporting the goods without cover of duty paying document, Shri Sai Freight Carrier has abetted the evasion of duty; that Ratan Singh, owner of the Truck has facilitated the transportation of the goods and the penalty under Rule 209A is imposable on all of them.
7. We have considered the submissions of both the sides. It is a fact that CTD Bars found loaded in Truck No. MP23 B 7024 were removed from the factory of the Appellant No. 1 without the cover of invoice and without discharging duty liability thereon. As per provisions of Central Excise Rules, 1944, no excisable goods can be removed from the factory of production without payment of duty and without the cover of invoice. Accordingly the goods are liable for confiscation and penalty is imposable on the Appellant No. 1. The learned SDR has referred to Panchnama dated 9.6.96 wherein it is clearly mentioned that Shri Sohan Lal Singhania was entirely satisfied from the method adopted for stock verification and further the Panchas were also fully satisfied. It is not the case of Appellant No. 1 that they challenged the shortage/excess found during the stock verification immediately with the Department. The Panchnama has been duly signed by Shri Sohan Lal Singhania. In his statement recorded on 9.6.96 also he did not dispute about the stock verification. In view of this, their contention raised about the method of stock verification, is not acceptable. The goods found in excess are liable to confiscation as the same were not entered into statutory records. The mere fact that the excess stock was inside the factory is not enough defence as the same is required to be entered into statutory records. However, we find that the Appellants No. 1 have explained about the excess of Ribbed bar as according to them the same was shown alongwith CTD Bars. They have also not explained the shortage of MODVATABLE inputs satisfactorily. The Commissioner has demanded the duty on the quantity of finished goods that could have been manufactured out of the quantity of inputs found short. In absence of any satisfactory explanation from the Appellants No. 1 coupled with the fact of shortage in inputs, the demand of duty confirmed by the Commissioner is to be upheld. However, we agree with the learned Counsel that in these circumstances when duty of excise is demanded on the finished goods said to have been manufactured out of inputs found short, MODVAT Credit in respect of the quantity of inputs cannot be disallowed to them. We also agree with the learned Advocate that the penalty under Section 11AC and interest under Section 11AB of the Central Excise Act cannot be imposed as both these Sections were not in the statute book at the material time. Penalty is also imposable on Shri Sohan Lal Singhania as the CTD bars seized from the truck was removed without payment of duty.
8. In respect of all other Appellants, we observe that penalty under Rule 209A of the Central Excise Rules, 1944 is not imposable in absence of any material to establish that they were knowing or had reason to believe that the goods were liable for confiscation. There is nothing on record to show that Venkatesh Steel Traders had requested the Appellant No. 1 to remove the impugned CTD bars without payment of duty or Shri Sai Freight Carrier and Ratan Singh were concious of the non-duty paid nature of the goods. For the same reason, Truck No. MP 23B – 7024 is also not liable for confiscation.
9. Accordingly, we hold as under:
(i) The demand of duty of excise against the Appellant No. 1 is confirmed.
(ii) The confiscation of ribbed bar is set aside.
(iii) The confiscation of CTD bars seized from the truck and the other excess stock seized from the factory is upheld. However, redemption fine in total is reduced to Rs. 30,000
(iv) Disallowance of Modvat Credit is set aside.
(v) Penalty imposed under Section 11AC of the Central Excise and interest demanded under Section 11AB of the Act are set aside.
(vi) Penalty on Appellant No. 1 in total is reduced to Rs. 40,000.
(vii) Penalty on Shri Sohan Lal Singhania is reduced to Rs. 5000
(viii) The confiscation of truck is set aside.
(ix) Penalties imposed on ail other Appellants are set aside.