ORDER
Shiben K. Dhar, Member (T)
1. This appeal is directed against the Order No. 8/CE/89, dated 21-12-1989 whereby Collector has confirmed duty demand of Rs. 69,716.75 on the ground that 6,747 tins of V.P. were not accounted in the record and were clandestinely removed. He also imposed penalty of Rs. 20,000/- on the appellants.
2. Arguing for the appellants, the Ld. Advocate submits that officers of Central Excise initiated certain enquiries against the appellant on the basis of an assessment order passed by the Asstt. Collector of Income Tax, Ludhiana, in 1987. A Show Cause Notice was issued to the appellants requiring them to explain why duty amounting to Rs. 14,71,097/- be not recovered from the appellant under Rule 9(2) of Central Excise Rules read with Section 11A of the Act. Penal action was also proposed. The basis of Show Cause Notice was that the appellants had pledged more stock of oil and vanaspati with the bank than what was shown in their raw-material register and RG-1 and that quantity shown as pledged with the Bank was cleared by the appellants and this quantity was liable to duty. The major portion of the demand was, however, dropped by the Collector.
2.2 The Ld. Advocate submits that entire case has been made out against the appellants on the basis of Income Tax Assessment Order which subsequently was set aside by Income Tax Tribunal. He draws attention to Order No. 1186/CHANDI/88 for the assessment year 1984-85 placed at Page-32 of the Additional Evidence Folder in which the Tribunal hold in their favour. The Revenue sought a reference from this order and this reference application was rejected by the Income Tax Tribunal vide their Order R.A. No. 197/CHAN-DI/92 and R.A. No. 236/CHANDI/92. The Tribunal observed that inflated pledge Memo was filed by the assessee with the Bank and the stock was never under the lock and key of the bank. Similarly hypothecation statement was also filed by the assessee with the bank without physical checking of/the stocks. On these facts, the Tribunal agree with the assessee’s plea that on the basis of the hypothecation of the stock no edition could be sustained. On these facts, the Tribunal rejected the reference application.
3. The Ld. Advocate draws attention to the statement of Sh. Ram Prakash, Director of the Appellants Company, as referred to in the Show Cause Notice at Page 2, and submits that Ram Parkash had disclosed that they enjoy a good reputation with their bankers and use to get more finances showing excess stocks pledged with the bank. The bank never puts any locks to the stock. The stocks were never in excess of the recorded balance. He submits that it was only to secure more finances that inflated stocks were shown as pledged with the bank. Statement of Sh. Bhatia, which merely describes procedure, cannot be relied upon against them, since what is prescribed in the procedure may not always be followed and in fact, they had desired cross examination of Mr. Bhatia, which was refused. There is no evidence whatever to establish clandestine removal of the goods and merely the fact that excess stocks were shown pledged with the bank for the purpose of securing more funds cannot be made a ground for sustaining the charge of clandestine removal of the goods. In support of his contention he cited the cases 1980 (6) E.L.T. 479,1992 (20) ETR 108, 1993 (65) E.L.T. 268 and 1995 (25) ETR 95.
4. Ld. D.R. reiterated the Department’s arguments.
5. Considered. The charge against the appellants basically flows from the Income Tax Assessment Order, which held that excess stocks were pledged with the bank. This order has been reversed by the competent Income Tax Authorities. Collector while dropping the major part of the demand, however, held duty of Rs. 69,716.75 payable on these tins on the ground that these represent the excess stock pledged with the bank, which was removed without paying duty. The contention that the stocks were only inflated to secure finances has already been accepted by Income Tax Tribunal and to that extent, the very basis of the charge goes. Apart from this, Show Cause Notice does not show any collaborative or affirmative evidence to indicate that these stocks, in fact, were physically in excess and had been removed clandestinely. Department itself has not collected any evidence apart from the Delivery Memo referred to in the Income Tax investigations to sustain the charge of clandestine removal. It was held by Tribunal in case of Punjab Oil & Silicate Mills v. Collector – 1993 (65) E.L.T. 268. Tribunal held that in absence of proof for having manufactured so much quantity of Sodium silicate, reliance only on the figures furnished to the Department of Industries are insufficient to come to the conclusion that the appellants have manufactured so much quantity of Sodium Silicate as mentioned in their affidavits filed before the Department of Industries. At best it may be an inference but not substantial proof. The Tribunal in this case relied among others on the case of J.A. Naidu v. State of Maharashtra 1983 (13) E.L.T. 1611 and that of Madras High Court in case of State of Tamil Nadu v. Indian Crafts and Industries – 1970 (25) STC 466 where the Hon’ble Court held that the morality or intention of an assessee does not enter into the field of adjudication in taxing law. Considering that there is total absence of corroborative or affirmative evidence and the fact that assessment order, on which the charges were based, has itself been set aside, I allow the appeal and set aside the impugned order.