ORDER
G.A. Brahma Deva, Member (J)
1. This is an appeal preferred against the order-in-original No. 19/CE/ADC/87 dated 29-1-1988 passed by the Additional Collector, Central Excise, Chandigarh.
2. The appellants are engaged in the manufacture of Soap falling under subheading 3401.00 of the Schedule to the Central Excise Tariff Act, 1985. They have been availing benefit of Modvat credit in respect of various soap compounds used as input in the manufacture of soap by filing declaration under Rule 57(G). The appellants were charged with the contravention of Rules 57(F)(i), 57G(3)(i) and 173Q of Central Excise Rules, 1944 on the ground that quantity of 1472.500 Kgs. of Soap compound was found lying in excess of the recorded balance in RG-23A Part-I in their store room though the Modvat had already been availed of on this quantity. The Additional Collector who adjudicated the proceedings observed that the goods found over and above the recorded balance were not to be used as inputs in the manufacture of soap but were likely to be disposed of in other way and as such no Modvat was available to them on this quantity. Accordingly, he confirmed the demand of Rs. 48,450.60, in addition to imposition of personal penalty under Rule 173Q of the Central Excise Rules, 1944. Hence this appeal.
2A. Mrs. Archana Wadhwa, learned advocate appearing for the appellants submitted that Additional Collector erred in passing an ex parte order without taking into consideration of the written submissions filed by the appellants, not afforded opportunity of personal hearing before passing the order. On merits, she said that the receipt of the said compound had been duly reflected in RG-23A Part I and the same had also been shown as issued for use in the manufacture of soap. The so called excess quantity represents the compound, which though shown as issued for such use in the record, had not been actually consumed as yet at the time preventive staff visited the factory premises. She argued that impugned order was based upon mere assumptions and presumptions. The Modvat benefit cannot be denied on the assumption that inputs in question are likely to be disposed of in other way without any positive proof. Further imposition of personal penalty was not at all justified as there was neither cause nor intention in evading the duty.
3. Shri S.K. Sharma, learned Junior Departmental Representative appearing for the Revenue justified the action of the Department in disallowing Modvat credit while reiterating the findings given by the adjudicating authority he said that Modvat was not permissible since the soap compound was not used as input, as such though it was shown as issued for use in the manufacture of soap.
4. We have considered the arguments advanced on both sides and perused the records. We concur with the argument of the appellants’ counsel that even an ex parte order should be based upon some facts and figures. It should not be proceeded on mere assumptions and presumptions. In the present case the adjudicating authority has proceeded to conclude his findings in disallowing the Modvat benefit on the assumption that soap compounds are likely to be disposed of other than their use in the manufacture of final product as input but without positive proof. Since it was clearly shown as issued for use in the manufacture of soap by making necessary entries in RG-23A Part I Register and same were lying in the store room within the factory premises, it cannot be presumed that they are likely to be disposed in other way unless actually it is done. It was not consumed for a period of three days after having been received as shown in the RG 23 Part I record and subsequently issued for use in the manufacture. Consequently, it was not entered in RG-23A Part I record though credit of duty was taken on this material in RG-23A Part II Register since there was no prescribed time for consumption and further the goods in question were lying in the store-room within the factory premises the Department was not justified in disallowing the Modvat credit on the presumption that same may not be used as input in the manufacture of final product. In the result, we set aside the impugned order and allow the appeal with consequential relief as it was already pronounced in the open court.
S.K. Bhatnagar, Vice President
5. While agreeing with my learned Brother I would like to add the following observations.
6. I find that the learned Additional Collector has virtually passed a non-speaking order inasmuch as in the operative portion of his order, he neither discusses nor records the basis for his conclusion that the department’s charges with reference to 57(F)(i) and 57G(3)(i) have been established.
7. In fact his observation regarding non-entry in RG-23A Part-I is at variance with the department’s own case as made out and recorded by the Additional Collector nimself under the heading ‘brief facts of the case’ in the Order-in-Origihal and no basis for this observation has been indicated.
8. A reading of the department’s own version of the brief facts referred to above indicates that the Preventive party had found some quantity “in excess of the recorded balance in RG-23A Part-I in their store-room”. Further the quantity said to be in excess was lying in the store-room and the officers were worried about the fact that this quantity had not been actually used till then although ‘shown as used’ in the manufacture of soap. They thought that it was kept for clandestine removal and disposal for some other purpose.
9. The appellants had denied the charges and had insisted that the quantity was duly entered in RG-23A Part-I and II. In these circumstances the learned Additional Collector was required.to examine the matter at length which he has obviously not done.
10. The department has also not shown any evidence circumstantial or otherwise of any attempt to remove the goods clandestinely. The learned Additional Collector’s order is silent on this aspect also.
11. During the course of the hearing before us the learned SDR could not clarify as to how it was a case of violation of 57F(1)(i) and 57G(3)(a) if the quantity had been duly accounted for in the RG-23A and was still lying within the factory premises.
12. We note that the learned DR also could not show any evidence to contradict the submissions made by the learned counsel for the appellant.
13. In the above circumstances, it is apparent that the case was made out only on the basis of assumptions and presumptions and suspicion and was not based on evidence. Hence, the learned Additional Collector had erred in passing the impugned order and imposing penalty.
14. I, therefore, set aside the order and accept the appeal.