ORDER
J.N. Srinivasa Murthy, Member (J)
1. Applicant has sought for the waiver of pre-deposit of duty of Rs. 3,85,320 and penalty of Rs. 1,00,000 and for the stay of recovery of the same.
2. The brief facts of the case are that the applicant manufactures rubber tubes classified under chapter 40 of the Tariff Act and it is a SSI tiny unit in backward area. On 14.11.1995 on a surprise visit made by the Inspector of Central Excise, Nanded, on an inspection, observed that statutory records were not maintained from 11.10.1995. The Assistant Commissioner of Central Excise, Nanded visited on 15.11.1995 and conducted a stock taking of finished goods and raw materials, and found shortage and excess of both category of above goods and issued a show-cause notice dated 3.1.1996 to show cause to the Additional Commissioner of Central Excise. Aurangabad as to why exemption under Notification 1 /93 dated 28.2.1993 should not be denied, why Central Excise duty of Rs. 5,14,099 should not be recovered and that the seized goods and finished raw material should not be confiscated under Rules 173Q and 226, why penalty should not be imposed under Rules 9(1), 52A, 173Q and 226 of Central Excise Rules. On submission of the reply by the appellant, the Order-in-Original was passed on 17.5.1996 by the Additional Commissioner and confirmed the duty of Rs. 3,85,320 and imposed the penalty of Rs. 1 lakh. On appeal the Commissioner (Appeals) confirmed the same in the impugned order.
3. The grounds on which the stay is sought for, are that the decision in the impugned order is an ex-parte one, without hearing the appellant. Suitable date was not given for the personal hearing as per the letters dated from 23.1.1998 to 3.8.1996 and there is a violation of principles of natural justice. Panchnama dated 13.11.1995 does not indicate that the stock of the scrap was conducted to the shortages and excess detected. Even though benefit of Notification 1/93-CE dated 28.3.1993 was granted in the Order-in-Original. The concessional rate of duty is not calculated while confirming the duty. The impugned order does not consider the case of the appellant in the appeal memorandum and stay petition. The applicant has submitted that they were manufacturing tubes on job works basis under Rule 57F(4), and is difficult to explain the position of raw material shortages and excess, detected. The panchnama does not speak anything about the scrap and its stock, and is totally defective. The original scrap lying on that date is not covered. The Director Shri K.D. Vora has clarified the position of the excess and shortage of both the raw material and finished products, which is not scrutinised properly. Details of figures of scrap are not mentioned in the panchnama. The difference pointed out scrap tubes by the Central Excise authorities was already mentioned in RG-I against column of finished goods. It was found due to the rejection of the tubes, as scraps. Statutory records were correctly maintained for branded and non-branded goods. The Additional Commissioner after hearing the applicant, instead of releasing the goods, passed the Order-in-Original. On merits they were not heard.
4. To support the above grounds the learned Counsel for the applicant has contended that the rejected goods were kept aside and the manufacture of rubber tubes were accounted in RG-I register and the rejected goods were further released for the manufacture of the rubber tubes as scraps. The applicant is a job worker for J.K. Tyre, and there is dispute in between them, and 2332 tubes were seized by the Police and if that is considered then there is no shortage, out of 4407 tubes weighing 6129 kgs. If SSI exemption concessional rate of duty were given, then the demand would be reduced by Rs. 1.19 lakhs. On the other hand, the full duty is levied. It is further contended that the unaccounted goods are removed without due payment of duty and Rule 9(1) of Central Excise Rule is invoked. Show-cause notice should have been issued and the matter should have been adjudicated only by the Commissioner, whereas in this case the show-cause notice was issued by the Assistant Commissioner and the matter is adjudicated by the Additional Commissioner and, it is not legally right. Mere shortage does not amount to clandestine removal. Apart from this, the applicant has been declared as a sick industrial unit by the BIFR under order dated 31.12.1996. It is a SSI unit under Central Excise and has incurred loss of Rs. 2 lakhs.
5. The Learned JDR has submitted that the position is admitted, about the shortages and excess, as per the statement given by the applicant. Apart from Rule 9. Clause (1) proviso of Rule 52A were invoked in show-cause notice. The registers were not maintained properly as admitted by the applicant.
6. Perused the stay application and the orders-in-original and appeal, and the show-cause notice and proceedings before the BIFR, detention memo, the copy of the panchnama and the balance sheet produced by the applicant. Also perused the case laws 1999 (32) ELR 465 in the case of East India Cotton Mfg. Co. Ltd. v. Commissioner of Central Excise 1995 (80) ELT12 in the case of Pawmi Tisshes Ltd. v. Collector of Central Excise in the case of Shamsons (I) Ltd. v. Collector of Central Excise and in the case of Collector of Central Excise v. ONGC. From the order dated 26.5.1992 of the BIFR in para 1 it is seen that in the hearing dated 31.12.1996 the applicantwas declared as a sick industrial company and IDBI has been appointed as an operating agency under Section 17B of Sick Industrial Companies Act, 1985. In such a situation the 1995 (80) ELT 12 in the case of Pawmi Tisshes Ltd. v. Collector of Central Excise pre-deposit is waived and a direction is given to hear the appeal on merits. in the case of Shamsons (I) Ltd. v. Collector of Central Excise also stay order was modified under which a pre-deposit of Rs. 45,000 was ordered by the Tribunal and pre-deposit was waived by modifying the stay order on the ground that the applicant was declared as a sick unit by the BIFR. In 1999 (32) ELR 465 in the case of East India Cotton Mfg. Co. Ltd. v. Commissioner of Central Excise applicant was declared as a sick industrial company, and the stay application was allowed, and operation of the impugned order was stayed till final disposal of the appeal. In para 9, there is a specific order that pre-deposit of the amount in question is waived and its recovery stayed during the pendency of the appeal. In view of the above position, the applicant is entitled to stay of the operation of the impugned order pending disposal of the appeal, and also the waiver of the pre-deposit. In view of this position, it is not necessary to consider the application on merits of the case.
7. As pointed out by the learned Counsel, the show-cause notice is issued by the Assistant Commissioner answerable to Additional Commissioner invoking Rule 9(1) alleging shortage and excess of the raw material and finished goods, alleging removal of the same without payment of duty. In in the case of Shamsons (I) Ltd. v. Collector of Central Excise it is held that mere shortage in stock of raw material by itself does not prima facie appear that goods have been manufactured and clandestinely removed, and on that ground the stay was granted. The applicant got a prima facie case regarding the validity of the show-cause notice involved in this case. So, to that extent, the applicant got a prima facie case. In view of the above discussion and finding, the application has to be and is allowed. Hence I pass the following order.