ORDER
Shiben K. Dhar, Member (T)
1. This is an appeal against the Order No. V (CH. 69) 15-3/89/Adj/17549, dated 3-8-1990 of Collector of Central Excise, Indore.
2. Facts in brief are :
2.1. M/s. Perfect Sanitary wares (referred to hereinafter as appellants) are engaged in the manufacture of Fire Bricks, Acid Resistant Bricks (A.R. Bricks) falling under sub-heading No. 6901.00 of the Central Excise Tariff Act, 1985.
2.2. Central Excise Officers, during the course of their visit to the factory premises on 21-12-1988, on the basis of stock verification found 89,912 pieces of A. R. Bricks valued at Rs. 3,02,006.70 were not accounted in statutory excise records. These were therefore seized but handed over under supurdinama to the factory management. It was also found that production of A. R. Bricks as indicated in Bhatta Register was much more than what was indicated in their RG I Account. It was alleged on the basis of this Bhatta Account that excess stock produced had not been accounted for in the RG 1 but had been removed without payment of duty. Certain differences were also found with reference to Nozzels as recorded in Bhatta Register and RG I.
2.3. On the basis of investigation made in regard to such excess/shortages they were issued a show Cause Notice demanding payment of duty of Rs. 3,54,263.23 and proposing imposition of penalty.
3. The Collector’s order dated 3-8-1990 against which this appeal is filed, held, among others, that there were certain calculation mistakes in the accounts and actually excess stock on 21-12-1988 was in fact 91,412 bricks as against 89,912 bricks. He did not accept the appellants plea that actual physical stock was much more but the officers seized only 89,912 bricks and rejected the contention that stock verification was not conducted properly. He however accepted the defence in regard to demand of duty on 3,864 bricks.
Based on the entries made in the Bhatta Register and the RG I Register, he came to the conclusion that 4,18,021 bricks had been removed without payment of duty. He also upheld the charge of 2350 number of bricks found to be short during the month of January, 1989. In regard to broken fire bricks, Collector did not accept the plea of the Noticee that these bricks had been recycled.
4. In the impugned order, Collector confiscated 89,912 bricks but gave option to redeem the goods on redemption fine of Rs. 60,000/-. He confirmed the Central Excise duty to the extent of Rs. 4,91,297.19 on suppressed production removed clandestinely during the period from April, 1987 to December, 1988 and also imposed penalty of Rs. 1,50,000/- on the appellants.
5. The appellants have come before us by way of appeal against the impugned order. The main points urged by the Id Advocate for the appellants before us are:
(a) The physical verification of stock was not conducted by officers properly and infact goods alleged to have been removed without payment of duty were actually lying in the factory premises. The ld. Counsel for the appellant in support drew our attention to verification given by chartered Accountant on the basis of various records maintained to indicate that the stocks alleged to have been removed were infact available in the factory premises but the officers seized only part of the stock. The very fact that Collector has himself held that 91,412 bricks should have been seized instead of 89,912 and the fact that there were some calculation mistakes in the verification sheet and other accounts would support their plea. Ld. Advocate therefore submitted the stock was lying in the premises but had not been taken in RG 1 as these were a waiting testing and that they had written to the department regularly for approval of open space as Bonded store room. In regard to broken pieces, it was submitted before us that these were sent for recycling, but the only omission was that they had not given any intimation to the Department about this, these had not been entered in RG 1 because these goods were not excisable. The ld. Advocate also urged that no work-sheet was supplied to them to show how exactly the verification was conducted. Ld. Advocate further submitted that goods are eligible to exemption in any case. He admitted that they have not raised this plea before but they were entitled to make such a plea at any stage.
Ld. Advocate finally submitted that entire case is based on assumptions and there is no corroboratory evidence to show removal of the goods.
Ld. Advocate relied on following case laws in support of various contentions urged before us:
1987 (31) E.L.T. 325,1989 (43) E.L.T. 259,1988 (33) E.L.T. 533 & 1985 (19) E.L.T. 497
6. The ld. DR Shri K. N. Gupta, submitted that it is admitted position that goods were not accounted. Therefore, penal provisions are attracted. 1985 (22) E.L.T. 413 and 1993 (63) E.L.T. 117 were cited before us in this connection. He submitted that there was no reason for officers to have seized only part of the consignment on the ground that it was unaccounted and not a much larger part which the appellants claimed to have been lying in the factory at that time. Small calculation mistakes/errors benefit of which has already been given by the Collector cannot vitiate the authenticity of verification report. The verification report relating to stock of bricks found in the factory was signed by representative of factory management and no protest was made thereafter about wrong verification conduct. There have been instances in the past also when the appellants removed goods without gate passes from the factory. During the earlier period the entries in RG 1 and Bhatta Register by and large tally but for the period for which the charge alleged is upheld by the Collector, there is large variation between the figures in RG 1 and Bhatta Register. All these he submitted would go to prove that goods not accounted have been clandestinely removed.
7. We have considered the submission made by both sides. We do not find much force in the contention of ld. Advocate for the appellant that goods held to have been removed without payment of duty were infact lying in the factory premises itself and that the officers did not seize the entire quantity of Bricks. The stock verification report has been signed by the representative of the factory and no request for further verification was made either at that time or subsequently. That there have been few calculation mistakes which were conceded fairly by the Collector himself cannot vitiate the verification report. Their plea that the goods had not been entered in the statutory accounts on the ground that these were awaiting testing and therefore lying outside the store room also cannot be accepted. Mere testing does not take much time and goods could have been accounted. Collector considered these and after going through relevant entries from the documents held that total unaccounted stock on 21-12-1988 was 91,412 bricks and not 89,912. He however, confined confiscation only to 89,912 bricks. Further on actual verification of documents, Collector arrived at stock verification of goods as 4,08,702 as against 6,02,542. This has been worked out on the basis of entries in the RG 1 and Bhatta Registers.
It is also admitted by ld. Advocate for the appellants that Bhatta Register infact represents the total stock of goods manufactured. Further, perusal of entries made in RG I and Bhatta Register for the earlier period indicates that by and large entries in the Bhatta Register and RG I tally; it is only during the period it is alleged that goods were removed without payment of duty that there are wide variations in the entries made in Bhatta Register and those in RG I. The verification report was duly signed by the representative of the factory. There was no protest during the subsequent period that only part seizure has been made. There is nothing to cast doubt on the authenticity of the verification report nor any reasons have been advanced why officers should seize only part quantity of the goods and not the entire quantity which admittedly was not accounted in the statutory records.
If however, Bhatta Register indicates the total bricks produced, the bricks lying in excess of those recorded in statutory accounts obviously have come only from Bhatta Account. That Bhatta Register indicates total production is not denied either by the appellants or by the Revenue. On specific question from the Bench that if Bhatta Register is to be taken as a source of entire production and shortages were worked out on the basis of entries made in the Bhatta Register and RG 1, would it not be logical to assume that excess stocks infact lying in the factory would have come only from the production recorded in Bhatta Register. Ld. DR in fairness conceded that he was not in a position to clarify this. We are of the view that once shortages are arrived on the basis of primary accounts admitted to be correct by both the appellants and the Revenue, excess stock lying in the factory has to be related only to such accounts and, therefore, these excess stocks have to be adjusted against the goods held to be removed without payment of duty on the basis of difference between primary accounts and RG 1. The total quantity of such Bricks removed without payment of duty would therefore, be less by 91,412 bricks found to be in stock but unaccounted.
8. We do not find force in the plea that demand is worked out merely on assumptions. Bhatta Account admittedly indicates the total production in the factory. Goods in excess of RG 1 were from the Bhatta Account which is admitted also by the appellants. It is also on record that in past some goods were removed without gate passes and without paying the duty. There is no plausible explanation for the variation between the figure indicated in Bhatta Register and in statutory registers. Nor there is any basis for the plea of ld. Advocate that goods held to have been removed without payment of duty were lying in the factory premises but were not seized even though unaccounted. We are therefore of the opinion that the case of removal of goods without payment of duty is not based merely on assumption.
9. In absence of any intimation or entry in statutory records that bricks described as broken bricks in Bhatta Register were used for recycling, this plea too cannot be accepted.
10. The plea for exemption has been raised only at this stage. The ld. Advocate admitted that this plea has not been raised earlier but submitted that there is no bar and the plea may be raised at any stage.
10.2 We, however, find that this plea has been raised only during the course of arguments and as the interpretation of exemption notification is not within the jurisdiction of this Bench, we do not deem it proper or necessary to go into this aspect.
11. In view of the discussions hereinbefore, we pass the following orders :
12. The impugned order is upheld except to the extent that duty amount of Rs. 4,91,297.19 is ordered to be reduced by duty leviable on 91,412 bricks found in stock but unaccounted, as duty on such bricks would be payable only at the time of removal, and therefore, the demand for such reduced duty is confirmed. Redemption fine is reduced to 15,000/- rupees and penalty to Rs. 70,000/-. Subject to these modifications, the appeal is otherwise rejected.