ORDER
S. Kalyanam, Member (J)
1. Proceedings were instituted against the appellants in connection with the seizure of a lorry bearing No. API 447 on 22-10-1988 at Jeedimetla, near Hyderabad allegedly carrying excisable goods without payment of duty, and the proceedings resulted in the impugned order of the Addl. Collector of Central Excise, Hyderabad dated 15-11-1989 directing appellant M/s. Multipoly Films (P) Ltd. to pay duty of Rs. 80,268 and disallowing credit of countervailing duty involved on receipts dated 11-10-1988, 14-10-1988 and 19-10-1988, and a penalty of Rs. 10,000/-. Likewise on appellant M/s. J.M. Plastics Industries a duty of Rs. 70,124.85 was levied and disallowing modvat on countervailing duty amounting to Rs. 1,46,265.35 for the receipts dated 3-10-1988 and 17-10-1988 and a penalty of Rs. 10,000/- was also imposed, under the provisions of the Central Excises and Salt Act, 1944, the Act for short.
2. Shri Jogayya Sarma, the learned Counsel for the appellants at the outset submitted that the goods in question specified in the impugned order were cleared under valid gate passes and unfortunately since the clerk in charge of the Excise was not available proper entries had not been made in RG 23-A Part II Register. It was submitted that the appellants imported granules on payment of Customs duties and in respect of the countervailing duties suffered by the goods imported, are entitled and eligible to take Modvat credit and the appellants had otherwise complied with all the statutory requirements for availing Modvat credit. The Department has not disputed the appellants’ eligibility to avail Modvat credit in respect of the goods imported equivalent to the Customs duty paid. After the seizure of the goods the goods were provisionally released on the appellants executing a bond in accordance with rules subject to the condition that the appellants should discharge their duty liability by proper entries in the statutory register. As per the direction of the Department the appellants had discharged the duty liability on the goods by making proper debit entries in RG 23A Part-II Register and this fact has also been specifically set out in the show cause notice. So far as disallowance of Modvat credit in respect of countervailing duty is concerned the learned Counsel submitted that it was not specifically set out in the show cause notice as to on what basis and why the Department chose to disallow the same and there is also no reason given in the impugned order for such disallowance. It was submitted that the appellant was eligible to take Modvat credit in respect of the imported goods which had suffered Customs duty and indeed had also taken the credit and there is absolutely no legal basis or factual justification for the authorities to disallow the same and much less without giving any specific reasons thereof. The learned Counsel, therefore, submitted that the appellants having discharged the entire duty liability under the Excise Act and also had properly taken Modvat credit in respect of the countervailing duty, the impugned order directing payment of duty once over and disallowing Modvat credit taken on the countervailing duty is not sustainable either in law or on facts. The learned Counsel very fairly conceded that technically removal of goods without making proper entries in the statutory register would only make for a venial breach not warranting the imposition of huge penalty of Rs. 10,000/- on each of the appellants. The learned Counsel further submitted that appropriation of Rs. 10,000/- in terms of the bond executed by the appellants at the time of provisional release of the goods on the grounds that the appellants had not made the goods available is also unjust and harsh, particularly when the appellant had paid the entire duty and mere production of goods would not have served any purpose to the Department. The learned Counsel, therefore, in the peculiar facts and circumstances prayed that the same may also be set aside.
3. Shri Subramanian, the learned DR submitted that the contention of the appellants with regard to complying with the excise duty liability by making proper entries in the RG 23A Part-II register will have to be verified and subject to that, the appeal may be allowed. So far as appropriation of Rs. 10,000/- on each of the appellants in execution of the terms of the bond on grounds of non-production of the goods concerned the learned DR submitted that the same is in order. Mere clearance of the goods on a gate pass would not suffice in the absence of a proper debit entry for discharge of duty liability as per law either in RG 23A Part-II Register or in PLA and the appellants admittedly not having done the same would be liable to penal consequences and left the quantum of penalty to the discretion of the Tribunal. So far as Modvat credit taken on the input which has suffered countervailing duty, the learned DR submitted that in the absence of records he is not able to vouch for the correctness of the submissions made by the learned Counsel from the Bar and prayed that suitable direction may be given to the adjudicating authority for due verification thereof.
4. We have carefully considered the submissions made before us. The goods in question were cleared without proper entries in the statutory register as per law and this fact is not disputed. Before the goods were released provisionally the appellants were directed to make proper debit entries for due discharge of the duty liability and according to the learned Counsel such debit entries for the duty payable on the goods were made in the RG 23A Part II Register and such entries were made only in pursuance of the order of the Addl. Collector of Central Excise dated 25-10-1988 which was communicated to the appellants by the Asstt. Collector of Central Excise on 27-10-1988. We have gone through the order of the Addl. Collector and the relevant para therein at the end of para 3 reads as under :
“I had gone through the order communicated by Assistant Collector (Anti-Evasion) vide G. No. IV /16 / 158 /88-Adjn. dated 25-10-1988 wherein it was said “before the release of the goods seized the party should also debit the duty amount in R.G. 23A Part II”. It was also on record that Multipoly Films Private Limited are having a balance of Rs. 3,87,574.17 ps as on the date of detection of the offence.”
If the appellants had complied with the direction and discharged their duty liability on the goods in question the appellants would not be liable to pay duty on the goods once over. The adjudicating authority is directed to verify the correctness of the plea made on behalf of the appellants, viz. with regard to discharge of the duty liability on the goods in question aforesaid and if the duty had been paid the appellants would not be liable to pay duty once over.
5. So far as disallowance of the Modvat credit on the countervailing duty suffered by the goods imported is concerned the adjudicating authority should allow the same on proper verification. The adjudicating authority has not given any reason for disallowance of the same and we, therefore, set aside the same. It is also represented by the learned Counsel that the appellants were permitted to take Modvat credit in respect of the countervailing duty by order of the Addl. Collector dated 25-10-1988 and communicated by the Asstt. Collector on 27-10-1988 to the Supdt. of Central Excise. The appellants in conformity with such directions not only made debit entries in respect of duty on the goods in question but also took Modvat credit equivalent to the countervailing duty suffered by the goods imported and due debit entries were made in R.G. 23A Part-II Register, which was also scrutinised by the Supdt. of Central Excise who signed the same in approval thereof. The learned Counsel submitted that the authorities may be directed to verify the correctness of the same. While setting aside that part of the order in the impugned order relating to disallowance of Modvat credit on the ground that no reason has been given, we further hold that it is open to the adjudicating authority to verify with reference to the statutory records, the pleas made by the learned Counsel for the appellants and set out above in this regard and take such action as is permissible under law.
6. So far as appropriation of Rs. 10,000/- out of the security deposit made by each of the appellants on grounds of non-production of the goods in terms of the bond, we reduce the amount to Rs. 7500/- (Rs. Seven thousand five hundred) on each of the appellants and so far as the penalty is concerned in the facts and circumstances we reduce the same to Rs. 5,000/- (Rs. Five thousand) each on the appellants. The appeals are disposed of on the above terms.
ORDER
V.P. Gulati, Member (T)
7. I observe that the following two points arise for our consideration :
(i) removal of goods without payment of duty;
(ii) denial of Modvat credit in respect of countervailing duty suffered by the goods imported.
The learned Advocate for the appellants pleaded that the goods have been removed without payment of duty, but he has, however, explained that removal without payment of duty was only on account of non-debit of the credit which would have been taken in respect of the inputs which were lying in stock. He has pleaded that the credit due was over Rs. 3 lakhs, and since the appellants’ clerk was on leave they could not take this credit of Rs. 3 lakhs. Be that as it may the fact remains that the goods had been removed without payment of duty in violation of the rule. Under SRP reliance is placed on the assessee for complying with the relevant rules through the medium of gate passes and debit entries to ensure that due duty has been paid. Any failure to comply with the requirements can lead to malpractice like duplicate transport of the goods. In view of this the goods have been rightly held to be confiscable by the learned lower authority. However, the learned lower authority taking into account the facts and circumstance of the case has taken a lenient view while fixing the redemption fine and penalty and for that reason we hold that the deposit appropriated out of the guarantee executed if reduced to Rs. 7,500/- (Rs. Seven thousand five hundred) would serve the ends of justice and we order accordingly. Likewise the penalty for this offence in the facts and circumstance has to be, therefore, taken to be for a technical breach and for that purpose the end of justice would be served if the penalty is reduced to Rs. 5,000/- (Rs. Five thousand).
8. So far as the denial of Modvat credit in respect of countervailing duty suffered by the goods imported is concerned the learned lower authority in the show cause notice has not set out the violation of the Central Excise rule(s) of procedure which disentitles the appellants to the benefit of the Modvat credit in respect of the C.V. duty paid on the inputs. The learned lower authority’s order in this regard is not a reasoned one and has to be set aside. The learned lower authority should decide the case de novo after giving the appellants an opportunity in regard to any alleged breach of rule or procedure which would disentitle them to the benefit of the Modvat credit.
