ORDER
K.D. Mankar, Member (T)
1. The appeal of the appellants is directed against the order-in-original passed by the Commissioner of Central Excise, Vide the impugned order duty to the tune of Rs. 1,23,384/- was confirmed on the goods found short during the punchanama proceedings dated 8.3.96. The duty was confirmed under Rule 9(2) of the Central Excise Rules, 1944 read with Section 11A of the Central Excise, Act. The Commissioner also ordered confiscation of goods valued at Rs. 7,61,305/- seized during the said punchanama proceedings in terms of the provisions of Rule 173 Q of the Central Excise Rules. The appellants were given an option to redeem the same on payment of fine of Rs. 2 Lakhs. Besides penalty of Rs. 1 Lakh was also imposed.
2. The appellants challenge to the aforesaid order is on the following premises.
i) Assuming without admitting that there were goods in excess of the recorded balance in the RG-1 Register, the same were lying in the factory premises only. There was no attempt on the part of the appellants to remove the same without payment of duty. In fact, there is no evidence that the appellants had ever removed any goods without payment of duty. The goods found in excess were due to procedural defects which were known to the Deptt. Be that as it may, since the goods were admittedly lying in the factory premises, the learned Commissioner has erred in ordering confiscation of the same. The order of confiscation of the goods, is, therefore, unsustainable in law and the same deserves to be set aside.
ii) The redemption fine of Rs. 2.00 lakhs in lieu of confiscation is too harsh, excessive and arbitrary. While admittedly the goods are lying in the factory premises and there is no deliberate attempt on the part of the appellants to remove the same without payment of duty, the learned Commissioner ought not to have ordered confiscation and imposed redemption fine in lieu thereof. Since the excess was due to procedural defects, a mere caution or warning could have met the ends of justice instead of imposing excessive redemption fine of Rs. 2.00 lakhs. The order of confiscation of the goods vis-a- vis imposition of redemption fine is, therefore, required to be set aside.
iii) As submitted herein before, the entire episode involving the artificial shortages and excesses took place due to the considerable period of time which was within the knowledge of the Deptt. and the Deptt. had never raised any objection nor guided the appellants, about the correct procedure to be followed. In these circumstances, the learned Commissioner ought not to have imposed any penalty on the appellants. In any event, the penalty of Rs. 1.00 lakh imposed on the appellants is too harsh and excessive and the quantum of penalty is totally disproportionate to the lapse, if any, on the part of the appellants. The order of penalty being harsh, excessive and disproportionate deserves to be set aside.
iv) In regard to the shortages, it is submitted that the appellants have already paid duty of Rs. 1,23,384/- by debit in RG-23-A Part-II vide entry No. 1324 dated 8.3.96 even before issue of the show cause notice. The appellants have, therefore, no objection to the said amount being confirmed. It is, however, submitted that these shortages were not due to unauthorized removal but on account of procedural irregularity only.
v) In his findings vide para 3 thereof, the learned Commissioner has observed that the appellants had continued to follow the defective procedure for a considerable period by making entry of intermediate goods in the RG-1 Register and the Deptt. including the audit have not objected to this procedure. The learned Commissioner, on perusal of the photocopies of the Rule 57-F(3) Register and the challans and also the certificate from the job-worker, was satisfied that on the date of panchnama, the goods were lying with the job-worker for job-working and there are no evidences of duty evasion. Nevertheless, he had proceeded to impose excessive fine and penalty which is contrary to his findings on fact and law. The impugned order, therefore, suffers from the vice of non-application of mind and misconception of the provisions of law. It is respectfully submitted that the appellants have not violated any provision of law nor have they any intension to eva de payment of duty of excise.”
3. Heard both sides.
4. On going through the impugned order, it is noticed that,
while the show cause notice dated 8.3.96 made an allegation of
shortage involving central excise duty of Rs. 3,26,210/-, the
Commissioner on examining the entire evidence of alleged
shortage with the records maintained regarding removal to job workers (Annexure III of the Show Cause Notice) confirmed the demand only to the extent of Rs. 1,23,384/- and the demand for balance amount was not confirmed. It is also noticed from the order-in-original that, the Commissioner has observed that, noticee (Appellants ) have made no attempt: to furnish any
clarification that, the excess goods were actually certain rejects which were entered in the RG-1, as removed for re-melting and were available in the factory. Similarly, I notice that, the
provisions of Rule 173 Q have been correctly applied for ordering confiscation and imposition of redemption fine besides
imposition of penalty of Rs. 1 Lakh for the aforesaid violations.
5. The challenge to ground of confiscation is that, since the goods were actually present in the factory, there was no attempt of removal. Hence confiscation is not proper. This ground is devoid of any merits, for the simple reasons that, Rule 173Q enjoins on the appellants to enter all the goods in the RG-1 Register which are in a fully manufactured conditions. If RG-1 stage itself was not finalized as claimed, then there ought to have been a collateral evidence in the form of private records,
as, intimated to the department in terms of Rule 173Q G (5) of the Central Excise Rules, showing that, not making an entry in the RG-1 was only an omission in the last stage of a long chain of the record keeping process where failure occurred. Since this has not been demonstrated, I hold that the learned Commissioner was justified in imposition of penalty on the ground of non accountal of the goods. In fact, the departmental authorities had to carry out the cross verification with reference to the goods dispatched and returned under Rule 57F(3) challans, to the job workers. It is noticed that clearance to job workers or the so called receipt from the job workers has not been totally ignored and the confiscation has been confirmed to the actual excess stock only after exhausting ah the possible explanation and possibilities about the legitimate presence of goods over and above the stock recorded in the RG-1. In respect of shortages also a proper verification was undertaken and the duty confirmed only for Rs. 1,23,384/- as against the amount of Rs. 3,26,210/- demanded in the show cause notice. Therefore, the order regarding confirmation of duty demand, confiscation, redemption fine and imposition of penalty is fully justified.
6. I, therefore, hold that the appellants do not have any case to challenge these findings. However, I agree with the appellants, that the fine and penalty amounts are quite harsh. Accordingly, I reduce the fine from Rs. 2 Lakhs to Rs. 1 Lakh and penalty from Rs. 1 Lakh to Rs. 50,000/-. But for this modification, the order of the Commissioner is otherwise confined. The appeal of the appellants is thus partly allowed.
(Pronounced in Court on 23/1/04)