ORDER
P.K. Kapoor, Member (T)
1. This is an appeal against the order passed by the Collector of Central Excise, Vadodara.
2. The brief facts of the case are that on 26-7-1988 at about 16.30 hours the Central Excise Officers in Surat while carrying out preventive checks detained a vehicle carrying 40 coils of copper wire weighing 4608.00 kgs. Apart from the Driver and conductor there was another person in the vehicle by the name Shri Ram Kumar Maurya who claimed that he was an employee of M/s. Patel Metal Works, Udhna. He informed the officers that the detained vehicle had arrived at the factory at about 15.00 hours to load 40 coils of copper wire and he had accompanied the vehicle under instructions from Shri Mauzambhai who was a partner of M/s. Patel Metal Works. He claimed that 20 coils bearing slips with markings “Z” were to be delivered to Shri Champakbhai, 10 coils marked ‘ZX’ to Shri Motichunni and the remaining 10 coils marked ‘IO’ to Shri Chandukanji.
3. He produced challan No. 372 dated 26-7-1988 for 40 coils of copper wire bars of over 6.00 mm cross section weighing 4654.350 kgs consigned to M/s. Johnson Electrical, Baroda and on Annexure III No. 816 dated 13-7-1988/26-7-1988 covering 5.61945 M. tonnes of copper wire exceeding 6.00 mm thickness consigned to M/s. Johnson Electrical, Baroda. Shri Raj Kumar further stated that even though the challan and Annexure III in his possession showed M/s. Johnson Electricals, G.I.D.C., Baroda as the consignee, the goods were to be delivered in Surat to the three parties named by him.
4. Both the driver and the conductor of the vehicle informed the officers that under instructions from Shri Ram Avtar Gupta of Nagpur, Surat Transport Co. on 26-7-1988, they had gone to M/s. Patel Metal Works at about 15.00 hours and after loading a consignment of 40 coils of copper wires under instructions from the partner of the firm they were proceeding to deliver the goods to the persons who were to be pointed out by the employee of the factory who was accompanying them. They also informed the officers that about 12.30 hours on that day, they had accompanied three employees of M/s. Patel Metal Works to deliver another lot of 40 coils of copper wires at a factory at Khardi Sheri in Surat.
5. During the course of investigations, Shri Ram Avtar Gupta, Manager, M/s. Surat Nagpur Roadlines, Sh. Mauzambhai, partner of M/s. Patel Metal Works and certain employees were questioned. The representatives of the three firms in Surat who according to Shri R.K. Maurya were to receive the detained goods and the Secretary of M/s. Johnson Electrical Co. Baroda were also interrogated.
6. During the scrutiny of the records of M/s. Patel Metal Works, the officers found triplicate copies of Gate Pass Nos. 1 to 21 dated 11-4-1988 and Gate Pass Nos. 22 to 55 were blank. On being questioned one of the partners of the firm stated that against these Gate passes, copper wire rods in coils having cross section exceeding 6.00 mm had been cleared.
7. After investigations, the detained 40 coils of copper wire weighing 4520.500 kgs. valued at Rs. 2,71,230/- were seized. However, on 12-9-1988 they were released provisionally against a bond.
8. During the course of their enquiry the officers found that M/s. Patel Metal Works, Udhna had filed classification list No. 71/88 dated 10-3-1988 declaring their product as ‘copper wire of refined copper of cross section exceeding 6.00 mm’ classifiable under Heading 7408.11 of the tariff and covered by Notification No. 98/88 dated 1-3-1988. They filed another classification list No. 33/88 dated 5-7-1988 in which the goods were declared as ‘refined copper alloys unwrought, refined copper (copper wire rods in coil form)’ classifiable under Heading 7403.19 and covered by Notification No. 178 dated 13-5-1988.
9. The Department felt that the products of M/s. Patel Metal Works having been manufactured from copper bars by rolling could not be deemed as unwrought and as coils of cross sectional dimensions exceeding 6 mm, they were classifiable under Heading 7408.11 attracting duty of Rs. 6200/- per M. Tonne as against the classification under Heading 7403.19 claimed by the manufacturers.
10. After issuing a show cause notice on 23-1-1989 and after taking into account the submissions made on behalf of M/s. Patel Metal Works, the Additional Collector passed the impugned order dated 4-7-1989.
11. On behalf of the appellants the learned Advocate Shri Willingdon Christian appeared before us. He stated that the department had sought to classify the goods under Heading 7408.11 as copper wire having cross sectional dimension exceeding 6.00 mm attracting duty Rs 6200/- per MT as against the assessment under Heading 7403.19 read with Notification No. 178/88 claimed by the assessee. He contended that the Additional Collector’s observation that the description of the product had been completely changed to suit the requirement of Heading 7403.19 was with reference to the revised classification list No. 33/88 dated 5-7-1988 and not in regard to the classification list No. 33/88 dated 10-3-1988. He contended that on account of the clearances during the relevant period having been effected in terms of the approved classification list under Heading 7408.11 against Gate passes and RT 12 returns having been filed and assessed by the department regularly there could be no charge of wilful suppression or misrepresentation. He argued that under these circumstances the Collector’s decision to invoke the extended period under Section 11A(1) proviso, of Central Excises and Salt Act was illegal. He further contended that even the declaration in the revised classification list filed on 5-7-1988 did not amount to any misrepresentation since the appellants were of the view that their product being drawing stock of wire rods had to be deemed as refined copper unwrought under Heading 7403.19. He contended that in terms of definition of copper wire in Note 1(F) to Chapter 74 of the Central Excise Tariff, a product to be deemed as copper wire has to be rolled extruded or drawn in coils having uniform solid cross section along its whole length in the shape of circles, ovals, rectangles etc. He claimed that having regard to this definition and the fact that his clients product was wire rod of non-uniform cross section meant to be used for processes like rolling, extension, drawing, forging, etc. it did not satisfy the definition of the term ‘wire’. The learned Counsel further argued that in the absence of any statutory definition, the meaning of the term ‘unwrought’ as understood in the trade parlance has to be accepted. In support of his arguments he cited the decision of the Supreme Court in the case of Aditya Mills Ltd. v. Union of India reported in 1988 (37) ELT 471 (SC) and Collector of Customs, Bombay v. Swastik Woollen (P) Ltd. and Ors. reported in 1988 (37) ELT 474 (SC). In this regard, he filed a copy of a document relating to a tender floated by the MMTC in respect of copper wire rods 8.00 mm size of unwrought or unalloyed variety. As regards the seized 40 coils, the learned counsel contended that the Collector had relied on certain circumstantial evidence ignoring the fact that the goods were being sent back to the Baroda party after processing under valid documents as confirmed by the partner and the concerned employees of this factory. He argued that there was no basis for the Collector to arrive at the conclusion that the seized coils were clandestinely removed since the product being exempted during the relevant period in terms of the approved price lists, his clients could not have had any motive to clear the goods in contravention of the law and the parties which had been named had denied that the goods were meant for them. He contended that the shortage of 1947.100 kgs on account of difference between the RG 1 balance and the quantity of the goods found on physical check was on account of burning losses but it appeared that the actual losses on this account were of the order of 1.5%. He contended that having regard to the overall turnover of 1,25,000 tonnes, these losses were ignorable. He contended that the adjudicating authority was not justified in imposing the redemption fine of Rs. 75.000/- since the goods were not physically available. He contended that the Collector could have appropriated only the cash security of Rs. 25,000/- in terms of the relevant Bond. In this regard he referred to the Tribunal’s decision in the case of Garner and Well (India) Ltd., Vapi v. Collector of Customs and Central Excise reported in 1986 (25) ELT 338.
12. On behalf of the department, the learned SDR Shri R.M. Ramchandani stated that at the time of seizure of 40 coils of copper wire on 26-7-1988, the classification list No. 33/88 dated 5-7-1988 was in vogue in which the goods were described as “Refined Copper and Copper alloy, unwrought refined copper (copper wire rods in copper form) and classification was claimed under Heading 74.03(19) read with Notification No. 178/88. He contended that the Collector had correctly held that the appellants products having undergone the process of rolling could not be deemed as classifiable under 7403.19 as unwrought copper. He argued that there was misrepresentation and suppression in regard to the nature and description of the goods in the classification list No. 33/88 dated 5-7-1988 and even in the list dated 71/88 the exemption claimed under Notification No. 98/88 was not admissible. He referred to the appellants letter dated 4-7-1988 addressed to the Superintendent and contended that even on the date of this letter there was no approved classification list since the appellants had given certain clarifications in reply to Superintendent’s letter dated 8-6-1988 in regard to classification list No. 71/88 dated 10-3-1988. He argued that for these reasons, the Collector was justified in invoking the extended period under the proviso to Section 11A(1) of the Central Excises and Salt Act. Shri Ramchandani stated that the M.M.T.C. tender documents on which reliance had been placed by the appellants was not relevant since it was in respect of unfinished goods to be used as raw materials after importation whereas the appellants goods being finished had to be deemed as wrought. In regard to the seized 40 coils of copper wire, he stated that as held by the Collector there was ample evidence on record to show that the goods were dutiable and were clandestinely removed from the factory without a gate pass. He contended that while imposing the redemption fine the Additional Collector had taken into account the fact that the goods were not available for confiscation and therefore, he had enforced the bond for recovery of a part of the redemption fine. He contended that having regard to the gravity of the offences, the penalty imposed on the appellant was justified.
13. We have heard both the sides and examined the records of the case. It is seen that the main points that arise for consideration in this case are –
(1) What was the classification of the appellants product, having regard to the declarations made by them in their classification lists No. 71/88 dated 10-3-1988 and No. 33/88 dated 5-7-1988.
(2) Whether it was permissible for the Department to invoke the provisions of the proviso to Section 11A(1) to avail the extended period of five years;
(3) Whether the seized 40 coils of copper wire were removed by the appellants from their factory in contravention of Rule 52A(5) and Rule 173Q(1) of the Central Excise Rules, 1944;
(4) Whether duty was recoverable under Heading 7408.11 of the Central Excise Tariff on 70.1029 M.T. of copper wire cleared from the appellants factory between 11-4-1988 to 25-6-1988;
(5) Whether duty was recoverable on copper wire weighing 1947.100 kgs. found short with reference the RG 1 balance.
14. For examination of the first point it would be desirable to refer to the classification lists filed by the appellants during the relevant periods. It is seen that on 10-3-1988 classification list No. 71/88 giving the following particulars was filed :
--------------------------------------------------------------------------------
S.No. Description of goods Chapter Rate of duty Notification No. & date
Heading
--------------------------------------------------------------------------------
1. Copper wire of 7408.11 Basic Duty 98/88 dt. 1-3-1988
refined copper of Nil
which maximum
cross-sectional
dimension exceeds
6 mm.
--------------------------------------------------------------------------------
S.No. Description of goods Chapter Rate of duty Notification No. & date
Heading
--------------------------------------------------------------------------------
2. Copper wire of cop- 7408.11 Basic Duty -do-
per alloys of which the Nil
maximum cross-sec-
tional dimension ex-
ceeds 6 mm.
--------------------------------------------------------------------------------
15. Thereafter on 5-7-1988 the appellants filed classification list No. 33/88 in which the following details were furnished :
1. Refined copper and 7403.19 Exempted 178/13-5-1988
copper alloys, un-
wrought refined cop-
per (copper wire rods
in coil form)
16. It is seen that in the classification list No. 71/88 dated 10-3-1988 they had declared their product as copper wire of refined copper of cross-sectional dimension exceeding 6 mm classifiable under Heading 7408.11 and also eligible for exemption under Notification No. 98/88. Thus on the basis of their declaration dated 10-3-1988 the item produced by the appellant was ‘wire’ which in terms of the definition in Note (f) to Chapter 74 of the Tariff had to be rolled, extruded or drawn product in the form of coil having a uniform solid cross section along its whole length. Being a rolled extruded or drawn product, it had necessarily to be the product of mechanical working of materials such as wire-bars or rods in a machine. It is evident that on issue of Notification No. 176/88 dated 13-5-1988, the appellants in an effort to fit in their product in this notification, filed the new classification list No. 33/88 dated 5-7-1988 in which they completely altered the description of their product declaring it as ‘refined copper and copper alloys, unwrought refined copper (copper wire rods in coil form). In the revised list the goods were claimed as classifiable under Heading 7403.19 of the tariff. In support of the claim that their product fell in the category of ‘unwrought copper’, the appellants have contended that in the absence of any definition of the term ‘wrought’ in the tariff, it would have to be interpreted on the basis of the understanding of the term in the trade or common parlance. Further, placing reliance on a copy of a Tender notice issued by the M.M.T.C. for the import of copper wire rods of unwrought and unalloyed variety conforming to ATTM B-49/78 specification, the appellants have argued that on the basis of the common understanding in the trade, copper wire rods have to be considered as unwrought items.
17. On a careful reading of the relevant tender notice we find that it leads to the unmistakable conclusion that copper wire rods whether pure or alloyed can be either wrought or unwrought. It is seen that the appellants are reading something in this Tender Notice which is not there at all and it does not help in any way in clarifying the meaning of the term ‘unwrought’ as understood in the trade or common parlance. We find that there is no evidence on record, on the basis of which inference could be drawn in regard to the meaning of the term ‘wrought’ as understood in the trade or common parlance. It is seen that in the case of Star Paper Mills Ltd. v. Collector of Central Excise reported in 1989 (48) ELT 178 (SC) the Hon’ble Supreme Court had observed that “The First Schedule to the Act specifies the excisable goods under various tariff items. In the absence of any definition of the term “component parts it is permissible to refer to the dictionary meaning of the word “Component”. Having regard to these observations of the Hon’ble Supreme Court it would be permissible to interpret the term ‘wrought’ on the basis of its dictionary meaning. In this regaard we find that in the Mc. Graw Dictionary of Scientific and Technical Terms (Second Edition) the term ‘wrought Alloy’ has been defined as “An alloy that has been mechanically worked after casting”. We find that a similar inference can be derived as regards the meaning of the term ‘unwrought’ from the following extract from the Note (d) on Bars and Rods in Chapter 74 of the Central Excise Tariff:
“Wire bars and billets with their ends tapered or otherwise worked simply to facilitate their entry into machines for converting them into, for example, drawing stock (wire rods) or tubes are however to be taken to be unwrought copper of Heading No. 74.03”.
Since admittedly the appellants product is the outcome of the process of rolling, it has to be deemed as having been mechanically worked upon. It has, therefore, to be categorisdd as ‘wrought’ and not ‘unwrought’ as claimed by them. Another point raised by the appellants is that the copper wire manufactured by them does not have uniform cross-section. In this regard it is seen that in classification list No. 71/88 dated 10-3-1988 in which they declared the goods as copper wire under Heading 7408.11, the sectional dimension was declared as over 6.00 mm. No claim was made in this list about the cross section of the product being uneven. Even in the revised classification list No. 33/88 dated 5-7-1988 no such claim was made. It is seen that in terms of the definition in the Chapter notes (d) and (f) both ‘rods’ and ‘wires’ are products of uniform cross-section. Hence, in view of the declaration of their product as ‘wire’ in the classification list No. 71/88 and ‘rods’ in the list No. 33/88, their claim at this stage that the goods in question were of un-. even cross-section has to be rejected. It has, therefore, to be held that during the relevant period the goods manufactured by the appellants were as declared by them in their classification list No. 71/88 dated 10-3-1988 and were classifiable under Heading 7408.11 of the Central Excise Tariff.
18. In regard to the question whether it was permissible for the department to invoke the extended period of 5 year under proviso to Section 11A(1) we find from the impugned order that as far as the classification list No. 71/88 dated 10-3-1988 was concerned, the appellants claim that it had been approved has not been disputed. It is also seen from the records of the case that in respect of the clearances effected on the basis of this classification list the appellants were preparing the Gate Passes and were also filing the monthly RT-12 Returns. In this regard it is seen that the following extract from the decision of the Tribunal in the case of Bengal Chemical and Pharmaceuticals Ltd. v. Collector of Central Excise reported in 1990 (48) ELT 436 is relevant.
“The learned DR submits that the appellants have misdeclared “Phenol” as drug in the classification lists. However, on going through the classification lists, we find that it has also been declared as “disinfectant” and therefore there has been no mis-declaration on the part of the appellants. We have also carefully considered the above citation relied upon by the appellants. In the case of Mac. Laboratories (P) Ltd. v. CCE -1985 (19) ELT 307, the Tribunal held that the special period of limitation is inapplicable if misstatement/suppression of facts is neither alleged in the show cause notice or proceedings nor spelt out in detail in the adjudication order. In the case of Nat Steel Equipment (P) Ltd. v. CCE -1988 (34) ELT 8 the Supreme Court observed that “in the absence of proof of suppression of facts, the longer period of 5 years would not be applicable. The appellants having set out all the details in the classification list and the Department having assessed the goods under T.I. 68 they cannot turn round and allege that there was intention to evade payment of duty. As such the modification of the classification list would only be prospective and not retrospective”.
19. We find that apart from the fact that the classification list which was in force during the relevant period had been approved, the appellants were also maintaining the statutory records and were filing the prescribed returns. Under these circumstances on the ratio of the decisions quoted above, it has to be held that it was not permissible for the Department to invoke the proviso to Section 11A(1) to avail the extended period of five years for raising the demands.
20. As regards the 40 coils of seized copper wire bars, the appellants have denied the allegation that they were to be delivered to three different parties in Surat. They have claimed that the seized goods were consigned to M/s Johnson Electrical from whom 50 copper wire rods weighing 5676.200 kgs. were received under document, Annexure, III No. 816 dated 13-7-1988 for drawing into copper wire bars and after processing only 40 coils of copper wire weighing 4654.350 kgs. were being sent back under challan No. 372 dated 26-7-1988 on account of the limited capacity of the vehicle. They have referred to the statement of the Secretary of M/s. Johnson Electrical, Baroda recorded on 6-9-1988 in which he had confirmed that 50 copper wire rods sent to M/s. Patel Metal Works, Udhna on 13-7-1988 had not been received back. It has also been contended that the owners of the three firms in Surat who according to Shri Raj Kumar Maurya were to receive the seized goods, had denied that they were to receive any goods on 26-7-1988 from the appellants.
21. It is seen that the statement dated 6-9-1988 of the Secretary of M/s. Johnson Electricals Baroda does not assist the appellants since it only confirms that 50 copper wire rods sent on 13-7-1988 to the appellants factory at Surat had not been received back. From this statement it cannot be inferred with any degree of certainty that 40 coils of copper wire bars seized in Surat on 26-7-1988 were meant for M/s. Johnson Electricals, Baroda.
22. It is seen that the statements of the three parties who according to Shri Raj Kumar Maurya, were to receive the seized goods, also do not carry any conviction when viewed in the light of the disclosures made by a host of witnesses. In this regard, it is seen that both the driver and conductor of the vehicle on being questioned shortly after the detention of the goods on 26-7-1988, had stated that the goods were loaded at the appellants factory at about 15.30 hours and were to be delivered to three parties in Surat city who were to be pointed out by the person who had accompanied them from the factory. They had also disclosed that on that day at about 12.30 hours after loading another lot of 40 coils of copper wire bars at the appellants factory, they had accompanied three other persons from the factory for delivering the goods at a premises at Khadri Sheri in Surat. Shri Raj Kumar Maurya who was found in the detained vehicle claimed that he was working in the appellants factory. He named three parties of Surat and claimed that in accordance with the instructions given by Shri Mauzambhai, one of the partners of M/s. Patel Metal Works, the seized goods were to be delivered to them. He disclosed that Shri Mauzambhai had given him Rs. 300/- towards the transportation charges for the goods. He also claimed that slips bearing distinctive markings had been affixed to coils to facilitate the identification of the goods meant for each party. He pointed out that though in challan No. 372 the goods were shown to have been consigned to M/s. Johnson Electricals, Baroda., they were to be delivered to three parties in Surat. On being questioned on 1-8-1988 Shri Ram Avtar Gupta the Manager of the transport company also confirmed that in accordance with his discussion over the phone with one of the partners of M/s. Patel Metal Works the vehicle was to make only two trips within Surat city and the charge fixed for each trip was Rs. 150/- The owner of the seized vehicle had also confirmed that on enquiries from his driver he had learnt that the goods were to be delivered in Surat and the vehicle was not engaged for transporting any goods to Baroda.
23. All these witnesses were closely associated with the appellants as workers in their factory or transporters of their goods. It is therefore, unlikely that they would conspire to give false statements to implicate the appellants. It is also seen that Shri Ram Avtar Gupta’s statement that the transport charge for two trips to be made within the city on 26-7-1988 was fixed at Rs. 150 per trip after discussion on phone with the partner of the appellants factory, finds corroboration in the statement of Shri Ram Kumar Maurya who had stated that he was given Rs. 300/- for making payment towards the transport charges. Thus, there is a great deal of evidence which supports the Department’s case that the seized goods were removed from the appellants factory against false documents for being delivered to certain parties in Surat city. In our view, when examined in the light of the overall evidence or record, the statements of the three parties, who according to witnesses were to receive the seized goods, are also of no assistance to the appellants.
24. The appellants argument that they could not have had any motive to contravene the law since during the relevant period, no duty was leviable on their goods, has also no force at all in view of our findings in regard to the classification of their product under the Central Excise Tariff. Under these circumstances, we are of the view that the Additional Collector’s order holding the seized 40 coils of copper wire weighing 4520.500 as liable to confiscation the appellants were liable to penal action under Rule 173Q(1) of the Central Excise Rules, 1944 is legal and sustainable.
25. The appellants have contended that the order passed by the adjudicating authority imposing a fine of Rs. 75,000/- in lieu of the confiscation of the seized 40 coils of copper wire was illegal since the goods having been released against a bond, were not physically available for confiscation. In this regard it is seen that as held by the Tribunal in the case of Garner & Well (India) Ltd., Vapi v. Collector of Central Excise, Baroda reported in 1986 (6) ECT 297 when the seized goods are released provisionally against a bond there can be no redemption fine and the only option available to the adjudicating authority in such a situation, would be to enforce the bond in a court of law. In this case, it is seen that while refraining from confiscating the goods which were not available for confiscation, the adjudicating authority could not resist the temptation of imposing a redemption fine of Rs. 75,000/-. For this purpose, he ordered the appropriation of the cash security of Rs. 25,000/- in terms of B-11 Bond and recovery of a further sum of Rs. 50,000/- from the assessee. In view of the decision of the Tribunal quoted above, we hold that in this case only the order appropriating the cash security of Rs. 25,000/- in terms of the B-11 Bond executed by the appellants is sustainable and the order regarding the recovery of a further sum of Rs. 50,000/- from the appellants has to be set aside.
26. In view of our finding that it was not permissible for the Department to invoke the extended period under proviso to Section 11A(1) of the Central Excises and Salt Act, 1944, we hold that the Additional Collector’s order confirming the demand of duty leviable on copper wire coils weighing 70.1029 M. Tonnes manufactured and cleared from the appellants’ factory during the period from 11-4-1988 to 25-6-1988 is not sustainable.
27. The shortage of 1947.100 kgs of copper wire found on physical verification of the stock with reference to the recorded balance, has been attributed by the appellants to burning losses. However, there is no force at all in claim. The daily stock account to be maintained by a manufacturer under Rule 53 has to reflect inter alia the figures of the production, clearance and balance of the manufactured excisable items. It is evident that in the appellants case, their product being copper wire, the actual weight of the goods produced and cleared had to be entered in the records and at any time the quantity of finished goods actually available in stock should have necessarily tallied with the recorded balance in the statutory records. Hence, we confirm the Additional Collector’s findings that the quantity of 1947.100 kgs of copper wire found short on verification of the available stock with reference to the recorded balance had to be deemed as having been surreptitiously removed without payment of duty and duty was recoverable on this quantity under Rule 9(2) read with proviso to Section 11A(1).
28. In view of the foregoing, the Additional Collector’s order confirming the demand of duty on 17,1029 Mt. of copper wire coils alleged to have been removed by the appellants during the period 11-4-1988 to 25-6-1988, is set aside. However, as regards the seized 40 coils of copper weighing 5420.500 kgs., the Additional Collector’s finding that the goods were liable for confiscation under Rule 173Q(1) of Central Excise Rules, 1944 and the appellants were liable for penalty is confirmed. In respect of these goods, we only confirm the order requiring appropriation of cash security of Rs. 25,000/- in terms of the B-11 Bond and set aside the order requiring the recovery of further sum of Rs. 50,000/- from the appellants. The order confirming the demand for the recovery of duty on 1,947.100 kgs of copper wire found short with reference to the book balance is also confirmed. We also confirm the finding of the adjudicating authority that the appellants were liable for penalty under Rule 173Q(1) of the Central Excise Rules, 1944. However, having regard to the facts and circumstances of the case, we reduce the penalty imposed from Rs. 1 lakhs to Rs. 50,000/- only.
The appeal is disposed of in the above terms.
