ORDER
Shri S.S. Sekhon
1. The appeal is directed against order-in-original dated 11.02.94 passed by Collector of Central Excise. Banglore demanding three sum of Rs. 1,96,483.60, Rs. 70,374.00 and Rs.5,101.00 from the manufacturing company i.e M/s. Maxon Engineering (P) Ltd, as Central Excise duty besides imposing penalty of Rs.20,000/- on them. In addition, the Collector had confirmed certain goods manufactured by the appellant and supplied to certain customers in Calcutta, Indore and Banglore on the grounds that these were non duty paid. Option was, however, given for the redemption of these confiscated goods subject to payment of fine in lieu of confiscation.
2. The appeal of M/s. Maxon Engineering (P) Ltd was decided by order no. 1028/1998 dt. 29.5.98 by the Tribunal who vide the said order held.
“….the penalty and the demand of duty for the items other than Annexure C and H. The finding in respect of these two Annexure C and H are set aside and the mater remanded for de novo decision after giving the opportunity of personal hearing. The correctness of the amounts of duty involved may be checked by the adjudicating authority.”
3. The present appeal has come up before us, which has been filed by the appellant, who as per the show cause notice had obtained on payment, certain goods from the manufacturer M/s Maxon Engineering (P) Ltd for a value of Rs.34,92,913, (vide gate pass nos. 2 dt. 20.5.93, Rs. 5,58,400, gate pass no.4 dt. 25.6.93. Rs. 16,15,929.20 and under gate pass no. 5 dt. 28.6.93 Rs. 13,18,584). These gate passes as alleged in the show cause notice itself, were having in RG23A/II, debit entry no. thereon. However, enquire revealed, the debt entries were not made in the concerned RG23A register. Therefore goods were seized in the possession of the buyer who, had received the goods in his remiss and they were asked to show cause. The goods were ordered to be confiscated on the following findings of the Commissioner
“The point for consideration is to determine as to whether the machinery received by the afire mentioned firms are liable for confiscation. As contended both by M/s. Nucor Wires and M/s. D&H Welding Electrodes, they have received the goods under cover of Central Excise documents. The fact that no duty was paid by the manufacturer was obviously not known to the consignees in as much as the transaction was covered under a Central Excise document in which the duty particulars and the debit entries were duty indicated. Therefore, I hold that there is no contravation of the provision of any Central Excise Rules by these purchasers. To arrive at this decision, I take support from the decision in Decent Dyeing — 1990 (45) ELT 201, wherein it is held that buyers are not required to ascertain whether the excise duty has already been paid as they have no means of knowing it. By their own admission, M/s. MEPL have removed the said machinery, without payment of duty and hence the seized goods and the goods found at the premises of M/s. Filare, Calcutta are liable for confiscation. As the machinery are seized from the purchasers premises, I am inclined to impose a fine in lieu of confiscation under the provisions of section 34 of Central Excise & Salt Act, 1944”.
and they were allowed on Rs.1,75,000/- as redemption fine payment, in lieu of confiscation, under section 34 of the Central Excise Act and Salt Act 1944. No penalty was imposed on the present appellants.
4. We have heard both sides and considered the submissions and find
(a) the Apex Court in the case of Decent Dyeing — 1950 (45) ELT 201 (SC) has very clearly held “…it would be intolerable if the purchasers were required to ascertain whether excise duty had already been paid as they have no means of knowing it….” In the preset case, we find that the appellant have made a case, that they have paid for the goods including the duty and the show cause notice it is alleged that the relevant RG 23A entries were shown on the concerned GPs. There was no means for the buyer therefore to be privy to the knowledge or suspect that the duty payment shown in the documents given by the manufacturers/sellers, were not debited in the accounts register and therefore the goods were ‘non-duty paid’. Therefore we find that when the imposition of penalty would not be called, the lability for confiscation of the goods itself is doubtful. In the facts and circumstances of the case, more so, when we find that the Collector in impugned order has recorded that the duties were paid vide debit entry dated 31.9.83 for removals made on 20.5.93, 25.6.93 & 28.6.93 the dates of the GP’s in issue, and the show cause notice has been issued only on 15.11.93. The entire liability for confiscation of the subject goods being non duty paid would be doubtful. We find that the entire dispute arises out of the manufacturers interpretation of notification, after availing MODVAT credit and confusion about the rate of duty applicable in the beginning of such shift to MODVAT had caused. the alleged violation. This has been considered by the Collector to be the reason, which has induced him to impose a penalty of Rs.20,000/- only on the manufacturer for these goods and other goods removed. when he primarily responsible for the payment of duty. However the same reason, for treatment of leniency, has not been considered by him for an innocent buyer. He found a reason for confiscation and imposition of heavy redemption fine i.e. almost 100% of duty, involved, which was already paid. Therefore, we can not find any justification for the high account of redemption fine as imposed.
b) We find, that section 34 of the Central Excise Act unlike section 125 of the Customs Act does not prescribe a format for determining the redemption fine. However, the adjudicator has to take into consideration the fact s and circumstances of each case and thereafter come to a conclusion, giving reasons why the fine imposed by him, is kept at the levels determined by him. Since the same has not been followed, we do not uphold the confiscation and the fine.
c) We find, that the show cause notice does not allege any particular rule to have been violated in the paragraph on charges, as regards the present appellant. While the same show cause notice does allege violation of rules 173Q/52A of Central Excise Act Rules. in the paragraph for another buyer M/s. Filarc Engineer (P) ltd, Calcutta. The Collector has come to a finding that there is no contravention of the provision of the Central Excise Act and Rule by the purchasers, thereafter the order impugned before us does not indicate what is the contravention which has been established for rendering the goods liable for confiscation in the present case. Such confiscations and imposition of fines therefore can not be upheld.
d) Examining the charges made in the show cause notice, as regards the violations in the notice, it is alleged that the manufacturer wilfully violated Rule 9(1) 52, 52A, 53, 173B, 173C, 57A, 57F, and rules 173 Q(1)(a), 173Q(1)(bb) & 173Q(1)(d) of the Rules. Examining the provision of these rules, we find
i) Rule 9(2) casts a duty penalty and confiscation liability on goods removed clandestinely in contravention of rule 9(1). Since goods have been removed on Gate Passes showing RG 23A Part II debit entry numbers. No confiscation arises under this rule for the goods in question.
ii) Rule 52 in applicable to other than SRP manufacturers and the present manufacturer is governed by rule 173A & chapter VII-A of the rules. There can be no violation of the said rule 52 in this case.
iii) Rule 52A prescribes the procedure for preparation of a Gate Pass and in the case of failure to prepare the same, risks confiscation liability. Admittedly in the case before us gate passes were prepared as prescribed under rule 52A. There is no contravention of this rule.
iv) The rule 53 is prescribing a daily stock register, there is no findings that a same was not maintained. There is no contravention under the rule 53 thus established.
v) Rule 57A, 57G & 57F are MODVAT Credit procedure rules, they have nothing to do, with the final product liability to confiscation which were the goods seized at the premises of the appellant. They are not applicable.
vi) Rules 173A, 173B, have been complied with, there is no finding that the final products have been removed without falling CL & PL.
vii) Rule 173(G)(1) prescribes removal only after making a debit entry and has been violated by the manufacturer. Therefore, liability under rule 173Q1(a) is attracted. There is no deliberate intention to evade duty as found by adjudicator. Therefore, violation of rule 173Q(1)(d) is not established. As regards 173Q1(bb) it is for violations only regarding availments of MODVAT Credit and has nothing to do with final product liability.
Thus, the only violation is of rule 173Q(1)(a), which reads-
“173Q(1) If any manufacturer, producer or registered person of a warehouse: (a) remove any excisable goods in contravention of any of the provisions of these rules”
then such goods shall be liable for confiscation.
e) Examining the liability for confiscation under rule 173Q(1)(a) for its contravention, we find this liability is an action in rem, arising due to the activities on part of a manufacturer of the goods. The rule makers have not fixed such a lability of confiscation on goods ‘Removed’ or have defined the terms ‘Removes’ used in the rule. The term ‘Removes’ used in present continuous tense. It will not cover past acts of goods ‘removed’ and the action of ‘removes’ will come to an end, when the act is complete. The act of ‘Removes’ under rule 173Q1(a) begins, when goods are shifted from the palace of manufacture and shall necessarily cease of reaching another place of delivery, after its leaving the factory gate and on change of ownership, as buyer is not covered by rule 173Q(1). Therefore, liability of confiscation under rule 173Q(1)(a) on a manufacturer is a continuous liability, till. ‘removes’ is completed and does not lie after completion i.e. after receipt and an change of ownership from the manufacturer to an independent buyer on payment of full consideration towards duty and or sale price or goods. If the goods are still handled, after such change of ownership or removal in any manner, then the liability of confiscation shall shift to under rule 209 and not remain under 173Q(1)(a) along with penalty liability under rule 209A on persons, other than those mentioned in rule 173Q(1) e.g. a buyer. There is no confusion liability arrived at under rule 209, liability of penalty found on the buyer under rule 209A. This order of confiscation therefore can not be uphold.
5. In view of the findings, the order of confiscation is set aside and appeal allowed.
(Pronounced in open court on)