ORDER
P.K. Kapoor, Member (T)
1. The appellants are engaged in the manufacture of Reactive dyes falling under Item 14D of the erstwhile Central Excise Tariff. On 14-9-1985 Central Excise officers visited their factory and found that a quantity of 1764.5 kgs of dyestuff valued at Rs. 2,10,731-00 was stored in 40 drums outside the E.B. room in a place marked as semifinished room. Suspecting that the goods were intended for clandestine removal, the officers seized the dyestuff contained in the said 40 drums after drawing samples of all the 13 different varieties of dyes. They also drew samples from the finished goods lying in EB 4 room for comparison. The officers also seized the records available in the factory. After carrying out the necessary tests the Chemical Examiner submitted his report in which he opined that the seized goods had dyeing property and as such they were marketable. After scrutiny of the seized records and further investigations the appellants were served with a notice dated 3-3-1986 alleging that
(i) by deliberately misdeclaring dye-stuff falling under Tariff Item 14-D as semi-finished goods and storing them outside the EB-4 room without entering them in the prescribed records they had violated the provisions of Rules 53, 226 and 173Q of Central Excise Rules, 1944;
(ii) by making a false claim that goods valued Rs. 15,144.65 and Rs. 5,825.80 respectively covered by invoice Nos. 217 and 246 in favour of M/s. Anjaneya Textiles had been received back, they illicitly removed goods valued at Rs. 9,455/- without payment of duty in contravention of the provisions of Rules 52A, 53, 226 and 173Q of the Central Excise Rules, 1944.
2. In their written reply and also during the personal hearing the appellants denied the allegations made in the show cause notice. However, in the impugned order, the Additional Collector rejected the appellants’ contention that the seized goods were semi-finished goods and held that being in finished and marketable state they were excisable under Tariff Item 14-D. He held that the charge that certain goods had been removed without payment of duty on the pretext of supplying goods in lieu of goods returned by customers was established and the appellants had been delaying the entry of finished goods in RG-1 with the objective of removing them clandestinely. On these grounds the Additional Collector ordered the confiscation of the seized 1764.5 kgs of Synthetic Organic Dyestuff under Rule 9(2) of the Central Excise Rules, 1944. He, however, gave the option for redemption of seized goods weighing 804 kgs which had been released provisionally, on payment of a fine of Rs. 5,000/- and on that account ordered the appropriation of the cash deposit of Rs. 5,000/- made on 23-12-1985. In respect of the balance quantity of synthetic organic dyestuff weighing 960.5 kgs also he gave an option for redemption on payment of a fine of Rs. 7,500/-. In addition, penalties to the tune of Rs. 1,000/- under Rule 9(2) and Rs. 12,500/- under Rule 173Q were also imposed on the appellants.
3. On behalf of the appellants the learned advocate Shri Rathina Asokan appeared before us. He stated that the learned Additional Collector had failed to note that the seized Synthetic Organic dyestuff were only semifinished goods and as such they were not marketable. He added that the semi-finished goods had to undergo further manufacturing process like pulverisation, blending and standardisation which is usually according to the specification of the prospective customer. He added that the seized goods had not been packed in containers since at the time of seizure they had not reached the stage of commercial sale. He contended that in terms of guidelines in the Bombay Collectorate Trade Notice No. 43/77, dated 12-4-1977 and also in accordance with the instructions given in the Basic Manual of Departmental Instructions on excisable manufactured goods the seized goods had not reached the RG-1 stage. He argued that the Chemical Examiner’s finding that the goods possessed dyeing properties and were marketable, was erroneous since the goods in question could not be brought to the market for sale until after the completion of blending and pulverising processes keeping in view the requirements of the Customers. He denied that the appellants clandestinely removed any goods on the pretext of clearing goods in lieu of goods received back from customers. On these grounds the learned advocate pleaded that the impugned order may be set aside.
4. On behalf of the Revenue the learned JDR Shri L.N. Murthy stated that the Chemical Examiner had certified that the seized goods were finished excisable goods. He argued that blending and other similar processes carried out to suit the requirement of individual customers cannot be equated with basic manufacturing processes such as pulverisation. On these grounds, he contended that there was no infirmity in the order passed by the Additional Collector.
5. We have examined the records of the case and considered the submissions made on behalf of both sides. The short point to be decided in this case is whether the seized Synthetic Organic Dyestuff could be deemed as having attained the RG-] stage after completion of the manufacturing process. In this regard it is said that the appellants’ case is that the Synthetic Organic Dyestuff weighing 1764.5 kgs had not been entered in RG-1 since the goods had not attained the stage for commercial sale. According to the appellants Synthetic Organic Dyestuff could be deemed as finished Excisable product under Tariff Item 14-D only after completion of all processes including standardisation and blending, according to the requirements of individual customers.
6. It is seen that the seized 1764.5 kgs of dyestuff packed in 40 drums had been stored adjacent to Bonded Store Room in a place marked ‘Semi-Finished Room’. In respect of the seized goods the appellants had not made any entries either in RG-1 or EB-4 Registers. The samples drawn from the goods lying stored in the bonded store room (EB-4 room) for comparison were sent to the Chemical Examiner. The Chemical Examiner in his letter dated 11-12-1985 addressed to the Superintendent of Central Excise stated that all the 20 samples in the form of coloured powder were found to contain mainly synthetic organic dyestuff having good dyeing property and as such they could be deemed as marketable. On the basis of the Chemical Examiner’s report the Collector held that the seized goods were excisable goods which had emerged after completion of the manufacturing process as a commercially distinct product having different nomenclature and usage, and any subsequent processing such as blending to suit the requirements of individual customer could not be equated to completion of the manufacturing process of unfinished products.
7. It is seen that Chemical Examiner had certified that the goods consisted mainly of Synthetic Organic Dyestuffs having good dyeing properties. He had also indicated that the goods were in marketable state. In view of these findings arrived at by the Chemical Examiner, we are inclined to agree with the adjudicating authority that the seized goods were fully manufactured excisable goods falling under Tariff Item 14-D. We also do not find any force in the appellants’ contention that in respect of Synthetic Organic Dyestuff the manufacturing process is completed only after the blending of the goods in accordance with the requirements of individual customers.
8. In view of the foregoing we uphold the Additional Collector’s finding that the appellants had failed to record the seized Synthetic Organic Dyes-tuff which were in fully manufactured state in RG-1 and thereby they had contravened the provisions of Rules 53 and 226 of the Central Excise Rules rendering the goods liable to confiscation. We, therefore, confirm the order of confiscation of seized goods. However, having regard to the facts and circumstances of the case, we reduce the amount to be appropriated against cash deposit in respect of goods weighing 804 kgs released provisionally to Rs. 2,000/- only. The redemption fine on the balance quantity of 960.5 kgs. of seized goods is reduced to Rs. 2,500/- only. We also set aside the penalty imposed on the appellants.
9. The appeal is disposed of in the above terms.