ORDER
N.K. Bajpai, Member (T)
1. This is an appeal against the order of the Collector of Central Excise, Bombay-II confiscating the following goods under Rules 9(2), 52A, 173Q and 226 of the Central Excise Rules, 1944 (‘Rules’ for short) read with Section 120 of the Customs Act, 1962 as made applicable to like matters in respect of duties of excise by Notification No. 68/63, dated 4-5-1963 issued under Section 12 of the Act:-
I. Goods detained/seized from the delivery van No. MMP 799 dated 16-4-85/18-4-85 respectively.
Description Quantity Value (Rs.)
(Kgs.)
Polyvinyl Acetate Disper- 1,110 28,860.00
sion (Modified)
II. Goods detained/seized from the factory premises of M/s.
Nevichem Synthetic Industries Pvt. Ltd. on 16-4-1985/
18-4-1985 respectively.
Polyvinyl Acetate Dispersion 5,400 1,40,400.00
(Modified)
III. Goods seized from the premises of M/s. Nevichem Agencies
on 18-4-1985.
Polyvinyl Acetate 5,771.60 Rs. 1,50,061.60
Dispersion (Modified)
Total 12,281.60 Rs. 3,19,321.60
Kg-
2. Since the goods had been released provisionally under a Bll Bond for an amount of Rs.1.5 lakhs, the appellants were asked to fulfil the obligation under the bond. The delivery van used for transporting the goods was also confiscated and released on a fine of Rs. 30,000 in lieu of confiscation. A penalty of Rs. 50,000 was also imposed on the appellants under Rule 173Q. The appellants were also required to pay duty on the goods which were seized and released on bond.
3. The allegation against the appellants was that they were engaged in the manufacture of Polyvinyl Acetate Dispersion (PAD for short) falling under Item 15A of the erstwhile Central Excise Tariff and had manufactured and removed 12 batches of goods consisting of 12,360 kg. without payment of duty during the period from 16-3-1985 to 16-4-1985 and without accounting for the same in the RG1 Account with an intention to evade payment of duty by wilfully suppressing material facts. These goods were consumed in the same factory in the manufacture of Polyvinyl Acetate Dispersion (Modified) (PADM for short) falling under Item 68. A part of the quantity so manufactured was sold to M/s. Nevichem Agencies, Bombay (NA for short) who had re-packed the same and cleared part of such goods 110 Kgs. which was seized from the delivery van on 16-4-1985. Officers had also seized 5771.60 Kgs. PADM from the factory of NA on the ground that these goods were also manufactured out of non-duty paid PAD manufactured by the appellants and subsequently sold to NA.
4. The allegation is based on an Exercise Note Book recovered from the appellants during the search in which entries relating to production during certain batches have been found for the period 16-3-1985 to 12-4-1985 during which period no entries were made in the RG 1 Account. In his statement dated 25-9-1985, Shri Navnit H. Joshi, one of the Directors of the appellant company, had confirmed on being shown this Exercise Note Book that 5 batches of PAD each consisting of 1030 Kgs. were manufactured during the period from 16-3-1985 to 31-3-1985 (total quantity 5150 Kgs.) and 7 batches (total quantity 7210 Kgs.) were manufactured during the period 1-4-1985 to 16-4-1985 – till the date of visit of the Preventive Officers to the factory. In his statement Shri Joshi also confirmed that these quantities of PAD were not accounted for in the RG1 Account and were removed without preparing any Gate-Passes and without payment of duty for captive consumption. Based on these entries in the Exercise Note Book, a statement was prepared showing total quantity of 12,360 kgs. of PDA manufactured and consumed in the manufacture of PADM without payment of duty. An amount of duty of Rs. 84,530.04 was also indicated in the statement.
5. The appellants’ case is that even though they had not made entries in the RG1 Account from 16-3-1985 onwards, it would not be correct to conclude on the basis of entries in the Exercise Note Book for the following dates that the process of manufacture of PAD was completed on each of those dates and the goods should have been accounted for accordingly on those very dates:-
Batch No. Date Quantity
69/85 23-3-85 1030 Kgs.
70/84-85 27-3-85 1030 Kgs.
Batch No. Date Quantity
71/84-85 30-3-85 1030 Kgs.
72/84-85 31-3-85 2060 Kgs.
73/84-85
Total 5150 Kgs.
1/85 4-4-85 1030 Kgs.
2/85 6-4-85 1030 Kgs.
3/85 8-4-85 1030 Kgs.
4/85 9-4-85 1030 Kgs.
5/85 10-4-85 1030 Kgs.
6/85 11-4-85 1030 Kgs.
7/85 12-4-85 1030 Kgs.
Total 7210 Kgs.
6. The argument is that the entries do not reflect the production, but only the commencement of the batch. The recovery of duty in respect of batches taken for manufacture on 30-3-1985 and 31-3-1985 will not be desirable inasmuch as the production can only be obtained after 16 to 20 hours and as such, the goods could not be produced for modification earlier than 1-4-1985. The further claim is that the appellants became eligible for fresh exemption from duty on PAD in the financial year which commenced on 1-4-1985 under Notification No. 85/85, dated 17-3-1985 and, the quantity of PAD which actually got manufactured on and from 1-4-1985 should not be denied exemption by treating the entries upto 31-3-1985 to be relatable as the production of the previous year 1984-85. During the hearing of the appeal, Shri Gopal Prasad, the learned Consultant, took the further argument that, in any case, the goods which became entitled to exemption with effect from 1-4-1985, could not be held liable to confiscation. How could the Collector then order confiscation of the goods while, at the same time, ask the Assistant Collector to examine the eligibility to exemption under Notification No. 83/83 or 85/85?
7. Regarding the liability for penalty for not making entries in the RG1 Account, Shri Gopal Prasad placed reliance on the decision of the Tribunal in the case of Kellner Pharmaceuticals Ltd., Kanpur v. Collector of Central Excise, Kanpur, [1985 (20) E.L.T. 80] and submitted that in the absence of malafides, a lenient view was called for and imposition of penalty was not warranted.
8. Shri L. Narasimha Murthy, the learned Departmental Representative submitted that there was no dispute that the appellants had not entered the quantity of PAD manufactured between 16-3-1985 and 16-4-1985. Entries in the Exercise Note Book confirmed the fact of manufacture of PAD in as many as 12 batches of 1030 Kgs. each and this had been established by examination of the original Note Book produced by him during the hearing. The argument of the learned Counsel that the entries do not reflect the production but only the dates on which the raw materials were taken and manufacture commenced was not acceptable.
9. Shri Murthy also submitted that Rule 52A prohibited delivery of excisable goods except under a Gate-Pass and this requirement was, therefore, applicable even to goods which were not dutiable or exempt. He cited the decision of the Karnataka High Court in the case of Karnataka Cement Pipe Factory Industrial Estate v. Supdt. of Central Excise, [1986 (23) E.L.T. 313], in which it was held that ‘excisable goods’ do not become non-excisable after exemption. The proviso to sub-rule (2) made it clear that a Gate-Pass had to be issued even for goods removed for captive consumptions within the factory for manufacture of other goods. It was, therefore, a mere technical requirement of the law. Similarly, the provisions of Rule 173Q were also applicable to removal of excisable goods in contravention of any provisions of the Central Excise Rules.Since the value of the goods removed in the present case was well over Rs. 2 lakhs, Collector had rightly imposed a penalty of Rs. 50,000. The question of calculation of duty alone had been left to the Assistant Collector.
10. We have carefully considered the appeal and the arguments of both sides. We have also seen the Exercise Note Book placed before us by the learned Departmental Representative. We do not find any substance in the argument of Shri Gopal Prasad that the entries in the Note Book relate to the date of issue of the raw material since there is no evidence to support such a contention. On the contrary, Shri Navnit H. Joshi, one of the Directors of the appellant-company, in his statement recorded on 25-9-1985, confirmed on being shown the Exercise Book that as many as 5 batches of PAD were manufactured during the period 16-3-1985 to 31-3-1985 and 7 batches were manufactured between 1-4-1985 and 16-4-1985. This statement has neither been retracted nor contradicted by any other evidence. Further, a careful examination of the Note Book shows the words “Production from 1-4-1985” on the opening page of the financial year 1985-86 and the use of the word “yield” on several pages (see entries for 6-4-1985; 8-4-1985 and 10-4-1985). When all these facts are taken into account cumulatively, no doubt is left that the argument of the learned Consultant is without any basis and deserves to be rejected.
11. Since this is a case of suppression of production and failure to account for the excisable goods in the statutory accounts, such goods were liable to confiscation under Rules 9(2), 52A, 173Q and 226 and the Polyvinyl Acetate Dispersion (Modified) was liable to confiscation under Section 120 of the Customs Act as made applicable to like matters under Section 12 of the Central Excises & Salt Act. We do not consider that in the circumstances of the case, the fine in lieu of confiscation was excessive and reject the prayer for reduction in fine. Since the delivery van was used for transportation of goods which were liable to confiscation and the order of confiscation has been upheld, the order confiscating the van is also upheld. We do not consider any reason to reduce the fine in lieu of confiscation of the van. For the same reasons, we do not consider there is any justification for reduction in the penalty on the appellants. The appeal, therefore, fails on all counts and is dismissed.