ORDER
Jyoti Balasundaram, Member (J)
1. The above appeal has been preferred against the order of the Collector of Central Excise received on 30-10-1982.
2. The facts of the case are as follows :-
The appellant has been manufacturing Electric Storage Batteries and parts thereof since 1952. In 1955, the appellant obtained a Central Excise Licence for manufacturing Storage Batteries falling under Tariff Item 31 of the Central Excise Tariff, which was renewed from time to time. Electric Storage Batteries were initially under physical control. Later they came to be regulated by the Self Removal Procedure. The appellant had its Sales Depot at Kashmere Gate, Delhi and its factory at G.T. Road, Shahdara. At the Sales Depot at Kashmere Gate, the appellant had arrangement for reconditioning of Batteries. Duty paid Battery plates removed from the factory were used for the reconditioning of Batteries. On 10-11-1971, Centra! Excise officials visited a Shed near the Victory Service Station, G.T. Road, Shahdara, which was about 2 furlongs away from the factory and found 100 Electric Storage Batteries bearing trade mark ‘ACME’ being packed. Enquiries were made and the factory premises of the appellant searched. Statement was also recorded from Shri R.G. Suri, the then Managing Director of the appellant. On 12-5-1972, a show cause notice was issued to the appellant alleging that, a: regards 100 batteries which had been seized from the Shed, there was reasonable beliel that they were actually manufactured by the appellant and removed clandestinely without payment of duty and without making proper entries in the statutory Central Excise records. It was further contended that, on the basis of the search carried out in the factory premises of the appellant, the appellant was selling goods on sales invoices which did not tally with the Central Excise records. It was contended that there was a difference between the batteries as sold on the basis of the sales invoices and the number of batteries manufactured and cleared by the appellant as per entries in the Central Excise records, i.e. RT-12 Returns. On the basis of the above, it was contended that the appellant had evaded payment of Excise Duty to the tune of Rs. 2,65,759.89.
3. It was contended in the reply to the show cause notice that Battery plates were being manufactured in the factory at Shahdara. These were brought to Kashmere Gate where they were utilised in the reconditioning of Batteries. Accounts of Battery plates so manufactured and cleared were available in the RT-12 Returns and in the Gate Passes. Not a single clandestine sale of plates was found by the Department during their investigations. The Import Applications related to Lead which was consumed and the figures supplied to the Import authorities included the Lead which was consumed and also the Lead which had gone into production of plates which were lying in stock. These plates were invariably used either for the manufacture of new batteries which were cleared by the appellant on payment of duty or these Battery plates were taken to Kashmere Gate for use in reconditioned Batteries. The equation of the Import Application figures with figures relating to manufacture and clearance of Batteries and Battery plates was, therefore, stated to be misleading. By order dated 18-3-1976, it was held that the appellant had manufactured and cleared considerable number of plates and they had been mostly supplied to their Sales Depot. The appellant’s contention that all these plates had gone for reconditioning of Batteries was, however, not fully accepted. However, the appellant was given the benefit of doubt & duty liability was confined only to clearance of Batteries, and not to Battery plates. In respect of the Import Application figures, the learned Collector gave the benefit of doubt to the appellant.
4. The Central Board of Excise & Customs confirmed the order of the Learned Collector. On the revision application filed by the appellant against the order of CBEC, the Central Govt. by order dated 18-8-1980 quashed the same and remanded the case to the Collector of Central Excise, Delhi, with the direction that the case be adjudicated de novo after issuing a proper show cause notice disclosing inter alia the contents of the report of the Assistant Collector of Central Excise. On 2-4-1981, a fresh show cause notice was issued consequent upon the aforesaid order of the Central Govt. All the allegations contained in the earlier show cause notice were repeated with the addition of \ para 6 which reproduced the report of the Assistant Collector who had been deputed to investigate in the matter and who had visited the factory premises and the Godown of the appellant. The Collector of Central Excise confiscated 100 Batteries under Rule 173-O. He confirmed the total demand of Rs. 2,65,759.89 for the period 1968 to 1971 and also imposed a penalty of Rs. 40,000.00. Hence this appeal.
5. We have heard Shri M. Chandersekhran, learned counsel and Shri B.S. Ganu, learned DR.
6. The appellants contend that the show cause notice dated 2-9-1981 is barred by limitation as it seeks to demand duty for the period 1968 to 1971. In the alternative, if the show cause notice is construed as a continuation of the earlier proceedings, then the findings in the earlier order in favour of the appellant cannot be denied – the first adjudication order extended the benefit of doubt in respect of Import application figures and also confined the demand to duty on batteries alone, setting aside the demand in respect of battery plates. In the impugned order both findings are against the appellant & duty has been demanded on batteries & battery plates. The 2nd limb of the appellants’ arguments is that the onus of proving evasion has not been discharged by the Department. The two pieces of evidence relied upon by the Deptt. are, firstly, the absence of markings of “ACME reconditioned” on the batteries & secondly, that the import applications for import of lead showed different figures. However, the report of the Assistant Collector who conducted the spot enquiry clearly states that the words “ACME reconditioned” were indicated on the batteries. Regarding the 2nd piece of evidence, the earlier adjudication order gave the benefit of doubt to the appellants, holding that the figures need not necessarily represent clearance of excisable batteries & plates & may include the stock of lead casted battery plates & balance of batteries & battery plates carried over to subsequent years. The learned counsel also submits that in the absence of proof of sales of batteries or battery plates allegedly in excess, the finding on clandestine removal cannot be upheld. Finally, he submits that the demand is based on retail prices & not wholesale prices & therefore is to be reduced to Rs. 55,087.41, in the event of the appellant being held to be liable.
7. In reply, the learned DR submits that the show cause notice dated 2-4-1987 is only a rectification of the earlier one & not a fresh one, while the earlier order having been quashed, the fresh adjudication order can travel beyond the limits of the earlier order; that sales invoices are also available as evidence regarding clandestine removal; that there is no finding that the batteries were re-conditioned & there is no mention of re-conditioning in the 1971 panchnama; that there is no co-relation between input of plates & batteries, that clandestine removal which is relevant for demanding duty has been established & proof of actual sales is not the requisite criterion & that in such circumstances, the Department has clearly been able to show clandestine removal.
8. We do not accept the argument of the learned counsel that the second show cause notice dated 2-4-81 is time-barred as it was issued consequent upon the order in revision of the Central Govt., directing de novo adjudication after issue of a proper notice containing the contents of the Asstt. Collector’s report. The show cause notice is therefore to be treated as a continuation of the earlier proceedings. However, we see great force in the contention that the order passed on adjudication of the proceedings initiated by the show cause notice of 2-4-1981 cannot travel beyond the earlier order and we hold that the appellants are entitled to the benefit of the favourable findings contained therein in respect of import application figures and battery plates. Therefore, we will consider the issue of confiscation of 100 batteries & demand of duty on batteries alone.
9. 100 batteries were confiscated “because party failed to state the name of the person from whom these batteries were got assembled & labour charges paid to them. The party also failed to conclusively identify the goods under seizure with old/new containers purchased by them. Also, where new containers have been purchased, there are reasons to believe that new batteries were assembled rather than old were reconditioned. After all, the goods seized were not found marked re-conditioned nor is there any mention in the panehnama to the effect.” These observations are totally contrary to facts as the Assistant Collector who had visited the factory categorically stated in his report that the seized batteries were found to bear the monogram “ACME Reconditioned”. He also found that the old batteries received from the market are opened & the defective plates & insulators in them are replaced with new ones. The Collector has not given any reasons for rejecting this report which is clear & categorical on this point, & in this view of the matter, the assessee could not be required to produce evidence that only defective parts had been replaced. We set aside the confiscation of 100 batteries.
10. The other allegation against the appellant was that during the years 1967-68 to 1971-72, a very large quantity of batteries & plates had been removed clandestinely without payment of duty. Year-wise particulars are as under :-
“(A) During the years 1967-68 and 1968-69 :
“(A) During the years 1967-68 and 1968-69 :
(1) Produced as per import ap- No. of No. of Plates
plication for the licensing batteries
period Oct '69/March, 1970
(i) during the year 67-68 2072 1,21,519
(ii) during the year 68-69 1751 1,54,568
(2) Cleared as per C.E. 711 1,40,100
records [i.e. 335(R) during (valued at (valued at
67-68] Rs. 2,77,303.75) Rs. 46,165.25)
(3) Alleged to have not been 1361 No indication
accounted for in C.E. (valued at
records - Sr. No. (1)(i) Rs. 2,77,303.75)
-Sr. No. (2)
(4) Alleged evasion of duty Basic Rs. 41,595.55
during 1967-68 worked out Spl. Rs. 4,159.56
on the basis of Sri. No. (3) Total Rs. 45,755.11
(5) Cleared as per C.E. 488 38,300
records during 68-69 (valued at (valued at
Rs. 91,566.43) Rs. 39,753.59)
(6) Alleged to have not been 1263 1,16,268
accounted for in C.E. (valued at (valued at
records - Sr. No. (ii) Rs. 2,36,969.32) Rs. 1,20,918.72)
-Sr. No. (5)
(7) Alleged evasion of duty Basic Rs. 56,709.16
during 68-69 worked out Spl. Rs. 5,670.91
on the basis of Sri. No. (6) Total Rs. 62,380.07
(8) Alleged evasion of duty Rs. 1,18,135.18
for the years 1967-68
and 1968-69 - Sri. Nos.
(4) and (No. 7)
(B) During the year 1969-70 : Nos. Value (in Rs.) Remarks
(1) Sold as per seized sale 1056 (B) 2,40,283.20 (B) Stands for
invoice batteries
(2) Cleared as per RT-12 257(B) 34,435.25
return
(3) Manufactured as per (i) 238(B) 31,585.63 (P) stands for
C.E. records (ii) 59559(P) 48,075.30 plates
Total of Sr.No.(3)79,660.93
(4) Book value of products Not 4,74,157.50
turned out as per App. 14 given
of Import Application,
submitted to Jt. CCI & E,
for batteries and plates
(5)Computed value of batteries Not 3,94,496.57
alleged to have been cleared indicated
without payment of
duty - Sri. No. (4) - Sri. No.(3)
(6) Alleged evasion of Basic Rs. 59,174.49
duty worked out on the Rs. 5,917.45
basis of Sri. No. (5) Rs. 65,091.94
(C) During the year 1970-71 :
(1) Sold as per available invoices 2146 5,45,667.73
(2) Cleared as per CE records 183 19,851.82
(3) Computed value of Not 5,25,851.91 Even though
batteries alleged to indicated not indicated
have been cleared without but that ap-
payment of duty - Sr. No. pears to be the
(1) - Sr. No. (2) position.
(4) Alleged evasion of duty Basic Rs. 78,872.39
worked out on the basis Spl. Rs. 7,887.24
of Sri. No. (3) Total. Rs. 86,759.63
(D) During the year 1971-72 :
(1) Sold as per invoices 134 39,095.00
(2) Cleared as per CE records 38 4,106.24
(3) Alleged to have been 96 34,988.76
cleared without payment of
duty -Sri. No. (1)- Sri. No. (2)
(4) Alleged evasion of duty Basic Rs. 5,248.31
on the basis of Spl. Rs. 524.83
Sri. No. (3) Total Rs. 5,773.14
(viii) The amount of duty, thus, sought to be demanded was:
1967-68 Basic Special Total
1967-68 41,595.55 4,159.36 45,755.11
1968-69 Batteries 35,548.40 3,554.84 39,103.24
Plates 21,160.76 2,116.07 23,276.83
56,709.16 5,670.91 62,380.07
1969-70 59,174.49 5,917.45 65,091.94
1970-71 78,872.39 7,887.24 86,759.63
1971-72 5,248.31 524.83 5,773.14
2,65,759.89
11. The show cause notice alleges that 5481 batteries have been cleared clandestinely. The evidence relied upon by the Department to hold that there has been clandestine removal of batteries is :
(a) import application figures furnished by the appellant for procuring import quota of lead; (b) lack of evidence that the same batteries were re-conditioned; and (c) sales invoices of the appellants.
We have already given our findings in respect of (a) & (b) above. Regarding (c), we find that the appellants’ explanation that they are selling both new and re-conditioned batteries through invoices is plausible. The argument of the learned SDR that the price per battery in Appendix 14 to the show cause notice is comparable with the price emerging from the excise records leading to the conclusion that there has been some manipulation and unaccounted production cannot be accepted because price of batteries will admittedly vary depending upon the number of battery plates contained in it. The Department has not been able to conclusively establish the charge of clandestine removal from the different figures found in the sales invoices and central excise records. We hold that the charge of clandestine removal has not been satisfactorily proved and therefore, we set aside the demand of duty on batteries.
12. In the result, we set aside the impugned order and allow the appeal with consequential relief, if any.