ORDER
S.L. Peeran, Member (J)
1. This appeal arises from the Order-in-Appeal dated 28-10-1996, passed by the Commissioner (Appeals), Ghaziabad. The learned Commissioner by his brief order, on examination of the case has merely held that it is a matter of practice to work out the quantity on average basis as it is not practicable to weigh the whole stock of the inputs/finished goods lying in the factory. He has observed that the method of stock taking adopted at the spot was signed by the party as well as Panchas. The M.D. of the company also did not contest this in his statement recorded on the same day. He has observed that to argue such points at this belated stage when the goods are already fixed up may not serve any useful purpose. Therefore, on this short reasoning, without due consideration of the various submissions and case law, the learned Commissioner has ordered for confiscation of excess goods valued at Rs. 2,13,226.24 and has given an option to redeem it on a fine of Rs. 10,000/-. He has held that since there is no clandestine removal of goods has been proved by the department, therefore, he has reduced the penalty to Rs. 5,000/-. This order of the Commissioner (Appeals) has been seriously assailed by the appellants on various grounds. The show cause notice proceeded on the premise that the appellants are engaged in the manufacture of “Shape and Sections” and waste and scrap of iron and steel falling under sub-heading No. 7216.10 and 7204.90 respectively of the Schedule to the Central Excise Tariff Act, 1985. It was alleged that on a. surprise visit by the Preventive Officers of Central Excise, Meerut and on conducting physical verification of the finished excisable goods as well as of raw material before the factory representative and two witnesses, charts of stock taking were prepared on the spot and were annexed as An-nexure ‘A’ and ‘B’ to the Panchnama dated 25-1-1995. It was alleged that on physical verification of the finished excisable goods, shortage and excess in the stock have been noticed. On verification, 534.614 M.T. of shapes and sections were actually found against the book balance of 552.001 M.T. Thus shortage of 17.387 M.T. of shapes and sections valued at Rs. 2,00,106.98 involving duty amounting to Rs. 30,016.40 was noticed. It was alleged that these goods found short had been clandestinely removed without payment of duty.
2. On physical verification of M.S. Scrap, 30,592 M.T. of M.S. Scrap valued at Rs. 2,13,226.24 involving Central Excise duty to the tune of Rs. 31,983.93 was found in excess over and above the recorded balance as detailed in Annexure ‘A’ to the Panchnama dated 25-1-1995.
3. It was further alleged that on physical verification of input (on which Modvat credit was availed), a quantity of 1,365.461 M.T. of Ingots/Billets/Blooms was found against the recorded balance of 1,471.133 M.T. in the RG 23 Part I register. Chart of stock taking of input prepared on the spot is appended as Annexure ‘B’ to the Panchnama. Thus it was alleged that 105.672 M.T. of Ingots/Billets/Blooms valued at Rs. 10,47,737.88 involving credit of duty (@ 15% adv.) amounting to Rs. 1,57,160.68 were found short vis-a-vis recorded balance in statutory record. The charge sheet was framed on the basis of issue of show cause notice calling upon them to explain as to why the penalty proceedings besides duty recovery proceedings should not be proceeded against them. The appellants took various contentions. However, these contentions were found to be acceptable to the Additional Commissioner, who adjudicated the proceedings. He has held that the party’s plea that the excess quantity of M.S. Scrap also includes finished products which were bent and unlevelled and meant for straightening by manual equipment is not tenable because party wrote to the Supdt. after a weeks’ time and did not include the working/weightment slips etc. specifying how many pieces of bent and unlevelled of shape and sections were included in the stock taking.
4. Regarding shortage in stock of shapes and sections, he has held that the party’s contention is that average length weight and size were taken to arrive at the weight of finished goods and being not ISI, difference in weight from piece to piece is possible. On this, the Additional Commissioner has observed that the party’s contention appears to be afterthought because the method of stock-taking adopted at the spot, was agreed upon by the party as well as the Panchas. Regarding party’s contention in their letter dated 18-8-1995, the officials knowingly did not ask any question as to why the said shortage or excess was found. The Commissioner has held that the party’s stand does not hold ground because onus of justifying is on the licensees. As regards the second issue of 105.677 M.T. of inputs i.e. ingots/blooms/billets found short, the party had contended that the average weight and length was taken into account and 65.280 M.T. of inputs lying in the furnace was not taken into account by the officers. In this regard, he has held that in the Annexure ‘B’ of the Panchnama i.e. for stock-taking report of inputs, it is clearly mentioned that Director and witnesses were agreed upon the basis of calculation of stock-taking. Therefore, he rejected their plea. In sum, the Additional Commissioner has merely rejected all the pleas without proper discussion and scrutiny of the records nor statements nor annexures and merely held that there is an admission in stock-taking and hence that by itself is ground to reject. It is necessary to point out that the Additional Commissioner was required to have looked into the objections raised and not rejected the same as an afterthought. It is clear from the reading of both the orders that there is a total non-application of mind and despite holding that there is no clandestine removal yet they have held that there is excess and shortage resulting in removal of goods calling for confirmation of duty. This is a contrary stand taken by the department.
5. On hearing both the sides, it was brought to my notice that in a similar case as rendered in the case of Collector of Central Excise v. Ambica Steels Pvt. Ltd. as per Order No. A/469/1987-NRB, a Bench of two members did not appreciate the manner in which the stock was taken and also in the manner in which the plea of the assessee was rejected. On perusal of the records, the Tribunal after very deep consideration in a similar case of identical goods, held that the piece of ingots seized by the officers were not of a uniform size. Actual weight of ingots would, therefore, be ascertained only by weighment of all the ingots. There is, however, no details of the weight of each ingot. No weighment sheet was supplied to the respondents, nor any such document could be shown to them. Therefore, the Tribunal held that the procedure adopted for weighment of the goods is not correct procedure and on that ground, the Tribunal has set aside the order.
6. In the present case, the Counsel took lot of pains to show that from the sheet prepared by the department that the size of the pieces were not identical and weight has been shown to be same, although there is a lot of discrepancy. It is his contention that the department ought to have weight the pieces and arrived at the correct weight. It was also pointed out that in one case, they had accepted their plea and dropped the proceedings. It was also pointed out that the department again for subsequent period, again visited the factory and again carried out the similar process of search. During that period, the appellants insisted on the weighment of the entire lots and on adoptation of the correct method, the department was satisfied that there was neither excess or shortage and on that ground dropped the proceedings. It was also pointed out that having come to the conclusion that there is no clandestine removal, therefore, it is incorrect to hold that there is a duty liability and the goods could be confiscated. In this regard, the Counsel brought to my notice several judgments, which has not been looked into by the lower authorities. They have all been brushed aside without any consideration and proceeded on the premise, that merely because Managing Director has signed the documents. There is admission in the case.
7. On a careful consideration of the plea, I am not satisfied that this procedure adopted by the department is correct and the party has a right to explain discrepancy in the statement, as also in the annexures and such explanations have been brushed aside as an ‘afterthought’, which is not tenable. The Counsel also brought to my notice the judgment of the Tribunal rendered in the case of Collector of Central Excise v. Pepsu Steel Rolling Mills as reported in 1997 (21) RLT 764, wherein it was held that the department had not shown evidence of clandestine removal and on consideration of the submissions, the duty liability was set aside but only confirmed penalty of Rs. 2,000/- or contravention of Rule 226 only. The learned Counsel also submitted that the goods which have been considered as waste and scrap are in fact finished goods and therefore, the order of confiscation is not legal and proper. In this regard, he cited the following judgments :-
(i) Balls and Cylpebs Ltd. v. Collector of Central Excise 1997 (92) E.L.T. 496
(ii) Metal Fitting Pvt. Ltd. v. Collector of Central Excise 1997 (20) R.L.T. 180.
8. In the facts and circumstances of the case and in view of the fact that the appellants’ pleas have nor been taken into consideration and that the subsequent proceedings have been dropped, it is but proper that the impugned orders are set aside and the matter remanded to the original authority with a direction that the pleas of the appellants are taken into consideration and detailed order is passed in the light of the judgments cited by them namely, in the case of Collector of Central Excise v. Ambica Steels Pvt. Ltd. as per Order No. A/469/1987-NRB and other citations. The appellants shall be given a copy of work sheet which they had asked for and supply such other materials, which had been relied by the department but not furnished to them. The appellants shall be given an opportunity to contest these materials by filing fresh replies, which shall be taken into consideration, before passing a detailed order. Thus the appeal is remanded to the original authority for de novo consideration.