ORDER
P.C. Jain, Member (T)
1. Brief facts of the case are that the appellant company, having been allowed by the Collector under the provisions of Sub-rule (5) of Rule 173-PP to clear the goods without payment of duty inasmuch as the quantum of duty was not determinable at the time of clearance of such goods, did not make average weekly deposits of duty on the basis of the previous month’s duty payment and corresponding debits thereafter in the months of April and May, August and October, 1983. It has been held in the first impugned order that the appellant-company should have debited the duty to the tune of Rs. 4,69,08,058.05 during the months of April and May, 1983; but it actually debited only Rs. 2,88,63,600.00. Breach of procedure of Rule 173-PP has, therefore, been upheld by the learned Collector. Accordingly, he has imposed a penalty of Rs. 7 lakhs on the appellant company under Rule 173-Q of the Central Excise Rules, 1944 vide the first impugned order.
2. The appellant on the other hand has urged that it is true that it did not make weekly deposits and thereafter debits in terms of the relaxed procedure allowed by the Collector under Rule 173-PP(5). Yet there was always sufficient balance in the PLAs to cover the amount of duty. There was no intention to evade payment of duty inasmuch as all serially numbered Invoices had been clearly mentioned in the PLAs. Advance deposits stipulated in terms of the relaxation provided by the Collector under Rule 173-PP(5) are not in the nature of duty and therefore, by not making deposits at weekly intervals, on the basis of duty paid in the previous month, the company cannot be said to have evaded payment of duty. Deposits could not be made because the company was under a tight financial position. In support of this plea, the learned representative drew the attention of the Tribunal to Annexure-B of the Appeals which is a Demi-official letter dated 6th October, 1983 from the General Manager of the company to the Collector. Non-making of deposits in a way, at the worst, could be treated as a little more relaxation than what, the Collector has provided within his powers under Rule 173-PP(5). However, whatever shortfalls in payment of duty was there at the end of the month, that was adjusted within 7 days of the following month.
3. Learned Representative for the appellant company has relied upon a number of authorities which stipulate that no penalty can be imposed if there is no intention to evade payment of duty. In particular, he cited 1985 (19) ELT 447 : 1985 (22) ELT 575.
4. Learned SDR has reiterated the findings in the impugned orders. He has also drawn attention to the cross-objections filed by the learned Collector which simply pray for maintenance of the impugned order.
5. We have carefully considered the pleas advanced by both sides. Sub-rule (1) 173-PP states as follows:-
“(1) In relation to these excisable goods comprised in Item. 68 of the First Schedule to the Act, the provisions of Rules 173-B to 173-P shall apply subject to the modifications specified in Sub-rules (2) to (5)”.
Further, Sub-rule (5) states as follows:-
“(5) Where the quantum of duty cannot be determined at the time of removal of goods, for any reason, the duty shall be adjusted in such manner and at such time as the Collector may direct by an order in each individual case for reasons to be recorded in writing”.
6. We are handicapped inasmuch as neither side has produced the exact terms of the procedure prescribed by the Collector for adjustment of duty in terms of his enabling power under Rule 173-PP(5). The appellant company indicates that it was merely required to make four weekly deposits on the basis of the duty paid in the previous months. Adjustment of duty was to be done only in the first week of the following month. The learned Collector in his impugned order has however, averred that the company was required to make debits of duty on the basis of duty paid in the previous months at weekly intervals (by making corresponding deposits of duty). In other words, the company was required to make four deposits of duty at every week equivalent to l/4th of the total duty paid by the company during the previous month. Out of such deposits, the company was required to make debit entries against the clearances taken by it in the current month. What the company appears to have done is that it has neither made deposits of duty every week, nor made debits of duty against the clearances taken by it during the current month.
In the absence of the exact terms of the order given by the Collector under the provisions of 173-PP(5), we rely upon para (3)(c) at p.281 of Central Excise Law Guide, Fifth Re-print Edition, February, 1986 written by Shri R.K. Jain which gives in brief the terms of relaxation generally allowed by the Collectors under Rule 173-PP(5). It is reproduced below for proper appreciation :-
“(3) The Collectors in exercise of the above-mentioned powers have given the following relaxations to the assessees manufacturing goods under Tariff Item 68 but these relaxations will be allowed by the Collector in each case on merits”.
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(c) Where the quantum of duty is not deter minable at the time of removal of the goods for any reason, duty may be determined and paid within one week of clearance of the goods and even if that is not possible, the assessee may make debit entry equal to an average weekly duty paid during the previous month in his P.L.A. at weekly intervals and make necessary adjustments within 7 days of the close of the month”.
7. Assuming the aforesaid to be correct position regarding the terms of relaxation given by the Collector, the company was not only required to make advance deposits as it says; but was also required to make debit entries on a provisional basis to be finally adjusted within 7 days of the close of the month. Obviously, the company has not followed this procedure inasmuch as it had not only made.advance deposits in P.L.A. but has also not debited the duty against such deposits. The final adjustment of debits and credits have been done by the company only within 7-8 days of the close of the month. Since the company has failed to follow the procedure prescribed by the Collector in terms of the relaxation given by him, it can be held that the company has removed the goods without payment of even the provisional duty.
8. We, however, observed that despite all deposits of duty having not been made and debits not carried out as required in terms of relaxation under Rule 173-PP(5), the appellant company had sufficient credits at the end of April and May, 1983 after taking into account the total debits of duty required to be made by it. In view of these circumstances, there will be no justification of imposing a penalty on the appellant company in so far as Appeal No. 1906 is concerned. Learned representative’s reliance on 1985 (19) ELT 447 appears to be well founded.
9. However, the position is different with regard to the other two appeals namely No. 1907 and 1908. According to the appellant company’s own admission, in the month of August, 1983, ad hoc deposits of Rs. 38.42 lakhs only were made against the required ad hoc deposits of Rs. 105 lakhs based on excise duty paid during the month of July, 1983. The actual duty liability during the month of August, 1983, according to the company came to Rs. 54,85,731.52. The difference between the ad hoc deposit and actual excise duty liability was, therefore, Rs. 16.43 lakhs. This was adjusted by the appellant company in the first week of September, 1983. On the basis of the appellant company’s own admission, it is held that the goods have been removed without payment of duty in terms of Rule 173-F inasmuch as they have not only not followed the procedure under Rule 173-PP(5) as prescribed by the Collector, but they have also cleared the goods without keeping sufficient balance at the P.L.A. Condition of sufficient balance in PLA would have got waived, if the company had faithfully followed the procedure of adjustment prescribed by the Collector under Rule 173-PP(5). On the failure of the company to follow the relaxed procedure, normal procedure would apply which in substance means maintaining sufficient balance in PLA to cover duty on goods removed by an assessee. It is very clear from the provisions of Rule 173-PP(1) as reproduced above that provisions of Rule 173-PP(1) do not supersede the earlier provisions of the Rules 173-B to 173-P, but they are modified only to the extent spelt out in provisions of Rule 173-PP. Therefore, it follows that if the provisions as modified by Rule 173-PP are not followed, the provisions of Rules 173-B to 173-P would apply.
10. The appellant company’s plea that it had finally adjusted the duty liability as required under the procedure in the first week of the following month and there was no intention to evade duty inasmuch as all the serially numbered invoices/Gate Passes were mentioned in the P.L.As. does not mitigate the offence of the company to the extent that no penal liability at all is incurred. These circumstances at the most lessen the gravity of the offence. A temporary evasion of duty can be said to have taken place. It is felt that a penalty of Rs. 15,000/-would meet the circumstances of the case. Accordingly, while upholding the impugned order, the penalty is reduced from Rs. 5,00,000/- to Rs. 15,000/-.
11. Similarly in Appeal No. 1908/84, the appellant company has admitted that the actual duty involved as held in the impugned order was to the tune of Rs. 96,10,879.19. A penalty of Rs. 1,00,000/- in the instant case would meet the ends of justice. Accordingly, while upholding the impugned order, penalty is reduced from Rs. 15 lakhs to Rs. 1 lakh.