ORDER
K.S. Venkataramani, Member (T)
1. This is an appeal against the order dated 9-4-1992 passed by the Additional Commissioner of Central Excise & Customs, Chandigarh. The appellants manufacture refractoryproducts covered by Chapter 69 Central Excise Tariff Act, 1985. In their declaration under Rule 174 of Central Excise Rules they had declared the value of clearance of goods as Rs. 4,86,163.25 and had stated that as per their estimate goods of value about Rs. 12 lakhs would be cleared during the year 1988-89. On 12-5-1989 appellants obtained Central Excise Licence on reaching the limit of Rs. 10 lakhs value of clearance which brought them under licensing control. They also paid duty of Rs. 805.35 on the value of clearance Rs. 15,340.25 in excess of the exemption limit of Rs. 15 lakhs. These details of value of clearance tallied with the information supplied by the appellants to the Sales Tax Department also. The Central Excise Officers however found on verification of the sales figures furnished by the appellants to the District Industries Centre, Patiala, that the appellants in their application submitted to that Department on 29-8-1988 had given a much higher sales figures for 1987-88 and 1988-89 upto 31-8-1988 and from. 1-9-1988 to 31-3-1989 than what was furnished by the appellants in their declaration before Central Excise Department. The appellants had also furnished to the Department of Industries a sworn affidavit confirming the figures given in the application. The Central Excise Department found that going by the higher sales figures furnished, and after excluding the value of clearances upto Rs. 15 lakhs which is exempted, the appellants were liable to pay duty of Rs. 1,96,875.40 on the sale of Rs. 38,51,620.75. A statement was also obtained from Smt. Parkash Sharma, the officer of the Industries Department who verified the figures declared by the appellant on 15-10-1990 who confirmed the correctness of the sales figures as verified by her with a sales ledger for the period 1-4-1988 to 31-8-1988. On further enquiries, the Central Excise Department was told by Smt. Sharma that the sales ledger produced before her for verification were other than the Registers maintained for Central Excise purposes. On 28-4-1989 Shri CD. Singla, Director of the appellants gave a statement in which he furnished what according to appellants were the value of clearances during 1986-87, 1987-88 and 1988-89 upto 31-3-1989. He also gave the formula of raw material in relation to output and the cost of production saying that the main raw materials for refractory goods were coal and fireclay. It was stated that for producing 150 M.T. of refractory goods 60 to 65 MT of coal, costing about Rs. 60,000/- is required, fireclay about 175 MT costing Rs. 25,000/- is required besides labour and miscellaneous expenses. It was further stated that the actual sales figures are the same which had been supplied to the Income-tax, Sales-tax and Central Excise Departments. Show cause notice was accordingly issued on 2-8-1991 and in reply it was inter alia contended that the show cause notice simply proceeds on the basis of returns filed with the Department of Industries which cannot be preferred to the data contained in Central Excise statutory records. The figures given by CD. Singla had not been shown to be incorrect, it was urged. It was further submitted that there had been a scarcity of coal due to which the Industries Department sanctioned a quantity much below than that applied for. The appellants explained that since the applied for quantity was not allotted to the consumer, they were compelled by the circumstances to justify demand for a higher quantity, and for this purpose had to furnish inflated figures of production to the State Department of Industries. The Additional Commissioner passed the impugned order after considering the appellants defence and found that the figures given to the Industries Department as duly verified by an officer of that Department with reference to the appellants records and supported by a statement by the verifying officer was a reliable basis for demanding duty. The demand of duty Rs. 1,96,875.40 under Rule 9(2) of Central Excise Rules read with Section 11A of Central Excises and Salt Act, 1944 was confirmed. A penalty of Rs. 50,000/- was also imposed on the appellants under Rules 9(2), 173Q and 209 of Central Excise Rules. This order of Additional Commissioner is presently challenged in this appeal.
2. We have heard Shri Harbans Singh, learned Counsel for the aplants and Shri R.A. Sheikh, learned Departmental Representative.
3. The submissions made have been carefully considered. The Department in his case relies heavily on the figures of sales of refractory productsd submitted by the appellants to the State Industries Department for the years 1987-88 and 1988-89 upto 31-8-1988 with a supporting affidavit. On this basis the charge of clandestine removal is made and the demand for duty has been worked out. But the learned Counsel for the appellants has cited and relied upon the Tribunal decision in the case of Punjab Oil & Silicate Mills v. Collector of Central Excise, reported in 1993 (65) E.L.T. 268 (Tribunal) in support of argument that the appellants had submitted inflated sales figures to the dustries Department in order to obtain higher quota of the scarce raw mate: coal, and that the Department cannot rest its case solely on that inflated declaration without any other corroborative evidence of manufacture, removals. In that decision, it is seen, the issue was identical and the Tribunal framed it thus :”…whether the Department was justified in relying upon the figures given in the affidavits filed before the Department of Industries the purpose of allotment of coal are sufficient material to hold that the appeal lants have clandestinely manufactured and cleared the goods without payment of duty and sworn affidavit given by the appellants before the other authority in different context for different purpose can be taken as a conclusive proof in the absence of any other corroborative evidence.” The Tribunal concluded that the declaration of figures of sales before the Department of in dustries with supporting affidavit will not suffice for making out a case of clandestine removal of excisable goods and demanding duty thereon. Par 12 of the Tribunal decision reads as follows :
“Para 12 – Further the case of the Department in charging clandestine manufacture and removal of the goods was based on figures furnished to the Department of Industries or as admitted by the party in then affidavits filed before the Department of Industries for getting the coal. We are of the view that any information obtained from the Department of Industries is not sufficient proof to show that the goods were manufactured unless it was substantiated with other evidence to show that the goods were clandestinely manufactured. On the same analogy we hold that even admission, confession or sworn statement given by the appellants before the other authority in different context for different purpose cannot be taken as conclusive proof in the absence of positive evidence adduced by the Department. At best it may be an inference but not substantial proof. Further this aspect was not considered by the original authority. Under taxing statute while concluding best judgment assessment it should be based upon facts and circumstances found by the assessing authority himself and he is not entitled to act wholly on the basis of the report made by the other authorities or an admission made by the party before the other authorities. In the facts and circumstances of the case and taking into consideration the ratio of the decisions cited (supra), we hold that the department was not justified in arriving at the conclusion that the appellants have clandestinely removed the goods in question based upon the figures furnished to the Department of Industries.”
4. The feature peculiar to the present appeal is the statement of the officer of the Industries Department who verified the figures declared in the appellants application and the deposition of that official in cross-examination. But this verification does not cover the whole of the period involved but related only to the period 1-4-1988 to 31-8-1988. The need for the Department to establish their case with other evidence arises because of the appellants claim in the statement of the Director of appellants Shri CD. Singla dated 28-4-1989 that their real sales figures were reflected not in their statement submitted to the Department of Industries, but in their Central Excise records, and in their Income-tax and Sales-tax Returns for the relevant period. Shri Singla had also given the input-output formula using main raw materials coal and clay. The department had also seized and was in possession of all the appellants.documents which included challan books, bill books, coal register, stock registers etc. Coal Register contained the process-wise consumption of coal and using these entries and the consumption of coal and clay, a study could have been made to ascertain whether the higher figures declared before the Department of Industries were probabilised by applying the result of the raw materialfinished product ratio during the relevant period. Such a study was also called for as it was not a case of interception of the consignment while being clandestinely removed, and also because of the appellants consistent claim that their declaration before Department of Industries contains of inflated figures to obtain higher quota of coal which was a [scarce] raw material. As has been observed by the Madras High Court in the case of State of Tamil Nadu v. India Crafts & Industries – 1970 25 STC 466 quoted in the Tribunal decision (supra), merely because the assessee conducted himself in a manner which was not conducive to ethics, the taxing authority could not invoke the provisions of reassessment and penalise him. The morality and intention of an assessee, the Court observed, does not enter into the field of adjudication in taxing law.
5. Therefore, applying ratio of the above cited Tribunal decision to the facts of the present case, it is held that the demand of duty and penalty on the appellants are not sustainable and hence set aside. The appeal is allowed.