ORDER
G.P. Agarwal, Member (J)
1. This appeal is directed against the Order-in-Appeal passed by the Collector (Appeals), New Delhi.
2. Factual backdrop: During the course of Annual Stock taking on 23-12-1983 in respect of Cotton yarn and Cellulosic spun yarn of the appellants Mills, certain quantities of yarn were found deficient in excess of two percent, as compared to the recorded balance. As a follow up action a show cause notice calling upon the appellants to show cause as to why appropriate duty leviable on the deficiency be not demanded and penalty be not imposed, was issued. In reply it was contended that the alleged shortage was actually the losses in weight of yarn which do occur in the course of manufacture and due to normal causes of evaporation and dryage, and hence condonable. However, the Assistant Collector after the usual Adjudication proceedings allowed the condonation of deficiency upto 2.5 percent and consequently confirmed the demand of duty at appropriate rates leviable on the deficiency beyond 2.5 percent but did not impose any penalty. Against the said order of the Adjudication the appellants filed their appeal before the Collector (Appeals) but without success. Hence the present appeal.
3. Shri M.D. Chaudhary, learned counsel arguing for the appellants submitted that the cotton yarn on Ring Bobbins, before being put on winding or reeling Machines, to be bound into cones or hanks respectively is conditioned by immersing it into water tanks for 10-15 minutes or placing it into steam chamber for 3-4 minutes. After winding or reeling into cones and hanks, the weightment is done and R.G. 1 is filled up. But these cones and hanks remain loose, till these goods are subsequently packed and sent to store room. During the course of conditioning of the yarn, some moisture continues to exist, which gets evaporated during winding or reeling and also upto the stage of packing and clearance. But R.G. 1 balances are not varied or changed, as such some variations in weight do occur, as packing or storage of yarn is not done in air-controlled conditions. In these premises Mr. Chaudhary, learned counsel submitted that the Assistant Collector rightly condoned the losses in the instant case upto 2.5% in respect of the goods shown at Sri. No. 2 and 3 of the show cause notice namely 24s cone and 14s Hanks SR, but erred in not condoning the losses in excess of 2.5% in respect of goods shown at Sri. No. 1 and 4 of the show cause notice namely 2/40 Hank CR and 328 Hank SR. To buttress his contention that the losses beyond 2.5% in the instant case i.e. to say 7.07 percent in respect of 2/40 Hank CR and 7.70 percent in respect of 328 Hank SR should have been condoned, he cited the following case law –
(i) Indian Oil Corporation v. Collector of Customs, Bombay, 1986 (25) E.L.T. 847.
(ii) Caltex Oil Refining (India) Ltd. v. Union of India, 1979 (4) E.L.T. 581.
(iii) Sialkot Industrial Corporation v. Union of India, 1979 (4) E.L.T. 329.
(iv) Order No. 578/83-NRB, dated 6/7-10-1983 passed by the Tribunal in the case of Amitabh Textile Mills Ltd. v. C.C.E., Kanpur, 1987 (31) E.L.T. 597 (Tribunal).
4. To emphasise his contention Shri Chaudhary also submitted that Straight Real Hanks, i.e. to say 328 Hank S.R. in relation to which 7.70% loss was not condoned by the department were exempted from whole of duty under Notification No. 275/82 dated 13-11-1982 as amended by Notification No. 104/83 dated 1-3-1983 and therefore, it cannot be the case of the department that the appellants removed this variety of the goods so as to evade any duty for the simple reason that no duty was payable thereon. He stressed likewise when there can be storage loss of 7.70% in exempted variety of yarn, there is no reason as to why there could be no loss of 7.07% in the case of dutiable yarn 2/40 Hank C.R. To support his point he cited the case of Collector of Central Excise v. Rajasthan Spinning & Weaving Mills, 1987 (32) E.L.T. 82.
5. In reply Shri S. Chakraborty, learned JDR supported the impugned order and emphasised that Order No. 578/83-NRB passed in the case of MA. Amitabh Textile Mills Ltd., is not a precedent as would appear from paragraph 9 of the said order.
6. Before I take up the contentions raised by the parties on merits, I would like to discuss the case law cited by the parties.
7. In the case of Caltex Oil Refining (India) Ltd. v. Union of India, supra, it was held by a Division Bench of the Delhi High Court that disappearance of a product by natural causes does not amount to removal and if there is no removal there would be no question of payment of excise duty for, removal is a positive act which cannot have any reference to disappearance of the product by evaporation or by natural causes. In my opinion there cannot be any quarrel with this proposition of law laid down by the Hon’ble High Court. Much depends on the facts and circumstances of each case.
8. In the case of Sialkot Industrial Corporation v. Union of India, supra, it was held by a Single Judge of the Delhi High Court that the expression “lost or destroyed” in Section 23 of the Customs Act, 1962 is used in the generic and comprehensive sense and not in a narrow sense. It postulates loss or destruction caused by whatsoever reason, whether theft, fire, accident including pilferage. In my considered opinion there can again be no quarrel on this proposition of law. Nor it was challenged by the department.
9. In the case of Indian Oil Corporation v. Collector of Customs, Bombay, supra, a claim for refund of excise duty purported to be under Section 70 of the Customs Act, 1962 which relates to allowance in the case of volatile goods and provides that “when any warehoused goods to which this Section 70 applies are at the time of delivery from a warehouse found to be deficient in quantity on account of natural loss, the Assistant Collector of Customs may remit the duty on such deficiency”. In that case condonation was sought for storage/loss which was less than 1%. This claim for refund of duty seeking condonation for losses in part was allowed by the Assistant Collector and confirmed on appeal by the Appellate Collector. In appeal against this order at the time of hearing it was contended by the Indian Oil Corporation, the appellants therein that the entire claim for losses i.e. to say 1% should be condoned in view of para 4 of the Board’s Bulletin for the period (January-March, 1965) Volume XI page No. 55, which reads as follows –
“No upper limit can be statutorily fixed for losses that may be condoned under Section 70 of the Customs Act. The 1% fixed by the board is a standard working rule upto which limit the Customs House need not enter into any detailed scrutiny to verify the bonafide of the reported loss. This no doubt means that losses in excess of 1% can be condoned. However experience of so many years indicated that such losses never exceed. In cases where it is decided to allow condonation above 1% the Customs House would have to very closely scrutinize the case and satisfy itself that the claim is genuine, technical advice would also be sought. The claim for losses in excess of 1% can be rejected if in the considered opinion of the Customs House it cannot be considered to fall in the category of natural loss contemplated in the said section.”
To this, the Tribunal observed that though the quasi-judicial authority like the adjudicating authority is not bound by the circular instructions of the Board, there could be no objection to have regard to such instructions which are mainly intended to achieve uniformity in the matter of granting condonation of losses which are considered as losses due to natural causes. After stating so, the Tribunal concluded that “the Board’s circular clearly indicates, that, after taking into consideration the experience gained during the past several years, the Board decided that the claim upto 1% should not be even enquired into” and allowed the appeal by condoning the delay which was less than 1%.
10. In the case of Amitabh Textile Mills Ltd. v. Collector of Central Excise, Kanpur, supra, (which relates to the appellants themselves here) the condonation of less in weight which on average worked out to 2.6% per year was claimed. It appears from para 7 of the Order passed by the Tribunal that the Bench hearing the appeal persistently questioned the patties that such losses of weight must be a regular phenomenon in Cotton Mills and there must be material from which some definite conclusion in the matter could be drawn. None of the parties, however, could place any material before the Bench in this regard. However, on the facts and circumstances of the case the Bench condoned the loss in weight varying from 1.41% to 3.06% on an average 2.6% per year during the relevant period observing that it should not be treated as a precedent. The said observations arc contained in para 9 of the Order which reads –
“9. On the facts and circumstances of the case without laying down any general proposition from the material on record before us, we see no reason to disbelieve the appellants in their claim for loss of weight as aforesaid…”.
11. Even the aforesaid decision passed by the Tribunal in the case of the appellants themselves, in my considered opinion does not help the appellants herein for, in that case loss in weight on an average 2.6% per year was claimed and allowed, whereas in the present ease the appellants are claiming condonation of loss in weight to extent of 7.07 and 7.70 and a part of it i.e. to say upto 2.5% has already been allowed by the authorities below.
12. Now on merits, the appellants as stated above are claiming the condonation of loss in weight of ‘7.07% in respect of 2/40 Hank CR and 7.70% in respect of 328 Hank SR and the authorities below have condoned the loss in weight upto 2.5% and consequently demanded excise duty at appropriate rates leviable on the deficiency beyond 2.5%. The claim of the appellants rests on the bare assertion, without any evidence oral or documentary, that the said loss in weight was due to evaporation in the circumstances pointed out by the learned counsel while arguing the appeal which are reproduced above. From para 5.2 of the impugned order passed by the Collector (Appeals) I find that at the time of personal hearing the appellants were specifically asked as to whether they have any evidence in the form of statistical details about losses occurring in their own unit or in general, for different periods of time, or over a period of time. To which, their reply was in the negative. Here also they have not produced any material before me from which some definite conclusion in the matter could be drawn. It was for the appellants to account for the deficiency found at the time of Annual Stock taking to the satisfaction of the proper officer in terms of Rule 223-A of the Central Excise Rules, 1944, which they have failed to prove as would appear from the impugned orders. Here also they have failed to account for the said deficiency. It is not the law that whenever any deficiency is noticed at the time of Annual Stock taking the same can be attributed to the evaporation or other natural causes. There can be no such rule of thumb. Much depends upon the facts and circumstances of each case. It is true that evaporation do occur in such cases and that is why the Board’s Bulletin as stated above has fixed 1% as a standard loss upto which limit the authorities need not enter detailed scrutiny to verify the bonafide of the reported loss and observed that when a claim for the condonation above 1% is made the officers concerned have to very closely scrutinize the case and satisfy himself that the claim is genuine, technical advice would also be sought. As observed in the case of Indian Oil Corporation v. Collector of Customs, supra, the adjudicating authority is not bound by such instructions, still there could be no objection to have regard to such instructions which are mainly intended to achieve uniformity in the matter of granting condonation of losses which are considered as losses due to natural causes, that is what actually has been done by the authorities below in the instant case. The Collector (Appeals) as stated above did ask the appellants at the time of personal hearing to produce any evidence in the form of statistical details about losses occurring in their own unit or in general, for different periods of time, or over a period of time but the appellants did not produce the said statistical details pleading that there was no such evidence. In the teeth of these telling facts and circumstances no case for condonation of loss in weight to the extent of 7.07% or 7.70% is made out by the appellants and I am not prepared to interfere with the satisfaction of the authorities below in this regard, more particularly when the loss in weight to the extent of 2.5% has already been condoned by the authorities below.
13. Before I part with the case I would like to state that the learned counsel for the appellants Shri M.D. Chaudhary also cited the case of Collector of Central Excise v. Rajasthan Spinning & Weaving Mills, supra, wherein by the Majority it was held that the blended yarn in which Polypropylene fibre predominated was not entitled to the benefit of Central Excise Notification No. 322/77-C.E., dated 1-12-1977. The said case is not relevant to the present controversy. The question whether the cellulosic spun yarn and cotton yarn in plain (straight) reel hanks whether single or multiple fold are exempted under Notification No. 275/82 as amended by Notification No. 104/83 or not is a question of fact. This question was never taken up by the appellants at any stage of the adjudication proceedings or before the Collector (Appeals) as would be evident from the reply to the Show Cause Notice, Adjudication order and the Order passed by the Collector (Appeals). Hence the contention of Shri Chaudhary that it cannot be the case of the department that the appellants removed the straight Reel Hanks so as to evade any duty has no relevancy while deciding the question as to whether the appellants succeeded in accounting for the deficiency to the extent of 7.70% in terms of Rule 223-A of the Central Excise Rules, 1944.
14. In the result, the appeal is dismissed being devoid of any merits.