ORDER
K.C. Mamgain, Member (T)
1. In this appeal, the appellants are challenging the imposition of penalty of Rs. 10,000/- and confiscation of goods which were released on a redemption fine of Rs. 10,000/-
2. Ms. Tamali Wad, learned Advocate appearing for the appellants pleaded that on 24-4-98. central excise officers visited the factory of the appellants and they found 20 number of wooden boxes packed in polyethylene bags in which 10 number of RS and 10 number of RPS (Electrical resistors) were found. These goods were seized and show cause notice was issued to the appellants for confiscation of these goods and imposition of penalty. The case was adjudicated by the Assistant Commissioner who confiscated the seized goods but allowed these to be redeemed on redemption fine of Rs. 50,000/- and he also imposed penalty of Rs. 50,000/-. On appeal, the Commissioner (Appeals) reduced the fine and penalty to Rs. 10,000/- each. She challenged the order of the Commissioner (Appeals) the ground that the finding of the Commissioner (Appeals) that the Adjudicating Authority has clearly held that the goods in question were themselves decalred as final products in the declaration filed by them and this finding of the Adjudicating Authority has not been challenged by the appellants that the goods were not declared as final products in their declaration. She referred to para 5 of their appeal memo filed before the Commissioner (Appeals) wherein it was staled that the order of the learned Commissioner in so far as it is based on the finding that RS and RPS have been declared by the appellants as final products is not only wrong but also contrary to the evidence on record. She also referred to para-h of her appeal before the Commissioner (Appeals). She also referred to the classification declaration filed by the appellants (page 23 of the paper book). Serial No. 6 of the said declaration reads as under:-
“6. Electrical Resistors (including Rheostate and Potentiometers); (but other than motor starters) like:
Rheostatic Braking Resistors, Dynamic Braking Grids with Blower Motors, DBRs, Resistors Units, Resistor Elements, Field Weakening Resistors, R.P. Resistors Filed Divertor Resistors (RS & RPS) with Field Weakening Resistors etc.”
She pleaded that these two items which were seized by the central excise officers were semi-finished goods which require further operation and these were required to be used in the manufacture of Field Divertor Resistors (RS & RPS) and electrical resistors (including rheostate and potentiometers). She pleads that in Serial No. 6 of the classification declaration they have given declaration as per order received from Chitranjan Locomotive Works. She pleads that these were not fully finished goods and these were not required to be entered in RG-1 register. She relied on the decision of the Tribunal in the case of Uptron Powertronics Ltd. v. CCE, 1991 (56) E.L.T. 245 wherein it was held that “the question basically looks down to the determination of the correct RG-1 stage as the goods are required to be entered only when such a stage has been reached. However, both the parties have not been able to show that any RG-1 stage has been notified by the board or the Collector. In these circumstances, it becomes necessary to look to mainly to two aspects (i) the evidence of completion of manufacture if any and (ii) the conditions of the contract if any. As far as the completion is concerned the appellants have stated that some minor jobs were further required to be carried out and this has not been shown to be incorrect or even denied by the department. Further the appellants have drawn our attention to the contract and to the mandatory clause of inspection included in it. Under these circumstances it cannot be stated that the appellants did not deliberately enter the goods in the RG-I to evade duty”. Regarding non-accountal, she referred to the decision of the Tribunal in the case of CCE, Chandigarh v. Parabolic Drugs Ltd. – 2004 (168) E.L.T. 135 wherein it was held that it must be kept in mind that ‘non-accountal’ cannot be equaled with ‘failure to make an entry in one of the register’. She pleaded that these goods were required to be inspected by Chitranjan Lokomotive Works before making entry in RG-1 register. She explained that seizure was made on 24-498 and they had not entered these goods in RG-1 register for the year 1998-99 as no finished goods were manufactured till that time and their register had been sent for authentication by the central excise authorities. Therefore, the confiscation and imposition of penalty is contrary to law. She also relied on the following decisions for non-imposition of penalty when duty is already paid before the issue of show cause notice :-
(1) CCE, Mangalore v. Shree Krishna Pipe Industries – 2004 (165) E.L.T. 508 (Kar.) = 2004 (113) ECR 718 (Karnataka)
(2) Kalon Engineers (P) Ltd. v. CCE, Delhi-I- 2004 (168) E.L.T. 334 (Tri-Del)
(3) Rashtriya Ispat Nigam Ltd. v. CCE, Visakhapatnam – 2003 (161) E.L.T. (Tri-Bang) 285 2003 (54) RLT 317.
(4) CCE, Delhi-III, Gurgaon v. Machine Montell (I) Ltd. – 2004 (168) E.L.T. (Tri-Del) 466 (Tri. Del)= 2004 (114) ECR 894.
3. In the present case, show cause notice was issued on 18-8-98 whereas the appellants had paid duty on the goods after completion of manufacture on 11-8-98. Therefore, learned Advocate requests that their appeal may be allowed.
4. Shri P.M. Rao, learned JDR appearing for the Revenue pleaded that in this case, the goods were not accounted for in RG-1 register as in the classification declaration, these were declared separately which is being contested by the appellants. He pleaded that mens rea is not required for imposition of penalty and decision relied on by the appellants are not applicable in the present case for imposition of penalty when the goods were cleared with intent to evade duty, He relied on the decisions of Kirloskar Brothers Ltd. v. Union of India and Ors. -1988 (34) E.L.T 30 (Bom.) and Media Video Ltd. v. CCE, New Delhi – 2003 (160) E.L.T, 609(Tri-Del) = 2003 (55) RLT 407.
5. I have considered the arguments of both sides.
6. I find that main issue in this case is whether the goods have reached RG-1 stage and whether these were declared as finished goods in their classification declaration. In their classification declaration at Serial No. 6, they have declared “Electrical Resistors (including Rheostate and Potentiometers), (but other than motor starters). Therefore, RS & RPS were not specifically mentioned in the classification declaration because these are under the exclusion clause. Secondly, RG-1 stage of these electrical goods was after the inspection of the goods. In these circumstances, it cannot be said that the goods were required to be entered in RG-1 register. Therefore, even though the goods were kept by the appellants in wooden crate which they claimed, are kept there for safety and protection before inspection, these cannot be considered fully finished goods when the inspection and other operation after the provisional release of the goods were required to be done. In these circumstances, when the goods have not reached RG-1 stage and specifically when these goods are meant for Chitranjan Lokomotive Works and no other purchasers of such goods are available, it cannot be said that the finished goods were kept unaccounted. Therefore, there is merits in the appeal filed by the appellants which is allowed and the order of the Commissioner (Appeals) is set aside.