ORDER
Archana Wadhwa, Member (J)
1. Both the appeals are being disposed of by a common order as they arise out of the same impugned order passed by the authorities below vide which duty of Rs. 5,87,312./- was confirmed against M/s. Shree Extrusions Ltd., along with confirmation of interest and imposition of personal penalty of identical amount. In addition, personal penalty of Rs. 2 lakhs was imposed on Shri D.R. Lahori, Managing Director of the said firm.
2. The appellants M/s. Shree Extrusions Ltd., is engaged in the manufacture of brass rods, wire, profile etc., falling under Chapter 74 of the Central Excise Act. The appellant’s factory was visited by the Central Excise officers on 27-3-99 when 17,943 Kgs of billets were seized by the Central Excise Officers and were handed over to the appellants under Supratnama. The present proceedings does not relate to the said seizure. However, subsequently the appellant’s factory was again visited on 4-7-2000 and various checks were conducted. On physical verification, stock of the finished products lying in the factory compared with RG-1 register was found to be correct. However, it was observed that 27,190.500 Kgs. of billets, which is intermediate product and was being consumed captively by the appellants, was short than the recorded balance of billets in the RG-1 register. Shri P. Kadecha, authorised signatory of the firm, in his statement tendered on 5-7-2000 clarified that the said shortage of goods also includes the 17,943 Kgs of billets seized earlier by the department on 27-3-99 and handed over to the appellants for safe custody. He further deposed that he is unable to produce the said goods in question, inasmuch as the same have already been consumed in their factory for the manufacture of further excisable finished goods for which no entry is made in their RG-1 register. Shri Kadecha’s statement was retracted by him on 6-7-2000, wherein he stated that the appellants had applied for provisional release of the goods and after waiting for the orders for provisional release, they used the billets from the seized stock and cleared the final product on payment of appropriate duty. His statement was further recorded on 27-5-2000, wherein he agreed with the first statement tendered on 5-7-2000. On the above basis, proceedings were initiated against the appellants by way of issuance of show cause notice, which culminated into an order passed by the Joint Commissioner confirming demand of duty against the appellants and imposing penalties as detailed earlier. Appeal against the above order did not succeed before the Commissioner (Appeals). Hence the present appeal.
3. I have heard Shri P.V. Sheth, ld. Advocate, appearing for the appellants and Shri U.H. Jadhav, ld. DR. for the Revenue.
4. It has been strongly contended that immediately after the visit of the officer and detection of the shortages, a protest was filed before the Commissioner of Central Excise vide their letter dated 8-7-2000, detailing therein that the stock of billets lying on the floor of the factory was not taken into account, which has resulted in shortage of the billets. Statement of Shri Kadecha was also retracted by submitting that the same was recorded under duress. Ld. Advocate has also submitted that a case of clandestine removal cannot be established on the sole ground of shortage of raw materials or intermediate goods or on the basis of statements. Drawing my attention to the various case laws, ld. Advocate has submitted that charges of clandestine removal should be established by production of sufficient evidence on record. There is no positive evidence to lead to the conclusion that the final product has been cleared without payment of duty.
5. Countering the arguments, Shri Jadhav, ld. DR. has submitted that even after the retraction of the first statement, Shri Kadecha has, in his subsequent statement accepted the first statement to be correct. As regards the protest before the Commissioner, ld. DR. submits that as a result of that letter Central Excise Officers visited the appellant’s factory immediately thereafter but they were not allowed to enter. He further submits that earlier seized material was handed over to the appellants for safe custody and utilisation of the same by the appellants without any permission or intimation to the department is gross violation of the Central Excise laws. He prays for rejecting the appeal.
6. After considering the submissions made by both sides, I find that the appellants have conceded the utilization of earlier seized billets by the departments which were kept with them for safe custody under Supratnama. Ld. Advocate agrees that this action was not justified on their part but submits that the same was without any intention to evade duty and was on account of the financial difficulty being faced by them. However, I do not find any merits in the above contention of the appellants. Shri Kadecha in his statement given on the spot has very clearly agreed that the quantity of billets seized on 27-3-99 and handed over to them have already been consumed in their factory for manufacture of excisable finished goods for which no entry was made in RG-1 register. The goods having been handed over to the appellants after the seizure, they were under a legal obligation to produce the same as and when called for by the department. Non availability of the said goods on the date of subsequent visit of the officers in the factory, read along with the statement of their authorised representative fully establishes that the goods have been consumed by them for manufacture of the final products. The appellants have also not been able to produce any evidence on record to show that such final products manufactured by them out of the seized billets was recorded in their RG-1 register or was cleared under the cover of Central Excise documents on payment of duty. As such, I am of the view that the duty is required to be confirmed against the appellants in respect of the said quantity of the seized billets and the appellants are also liable to penalty for the contravention committed by them, as discussed.
7. However, as regards the balance quantity, I agree with the ld. Advocate that there is no categorical acceptance by Shri Kadecha in his first statement given on the spot. They have also contested before the Commissioner that the billets under process were not taken into account while conducting the stock taking. The DR’s plea that the factory was visited subsequently, but the officers were not allowed to enter has been effectively rebutted by the ld. Advocate when he submitted that the subsequent day of visit of the officers was a public holiday and nobody was present in the factory. The officers were also not in uniform and in these circumstances the Chowkidar did not allow them to enter the factory. He has further submitted that the officers could have visited the factory and verified the stock on the next working day, but they failed to do so. The ratio of the various decisions that mere shortage of raw materials by itself is not a sufficient ground to establish the charge of clandestine removal of the goods applies in the present case. It is not only the shortage of the raw materials but the appellant’s protest to the Commissioner immediately after the visit of the officer that the cut billets and the under process billets have not been taken into account which help me to take a view that there was no actual shortage of billets and the same was pseudo. There is no other evidence on record produced by the Revenue to show that the billets are being used in the manufacture of final products cleared clandestinely. In these circumstances I extend the benefit of doubt to the appellants in respect of the balance quantity of billets found short.
8. In view of the facts and circumstances of the case, penalty upon the firm is reduced to Rs. 2 lakhs. Penalty of Rs. 2 lakhs imposed upon Shri Dinesh R. Lohati, Managing Director is however set aside. Duty in respect of 17,943 Kgs of billets is confirmed, which the lower authorities would quantify. Duty in respect of balance quantity of 9247.500 Kgs is however set aside. Both the appeals are disposed of in above terms.
(Pronounced in Court on 5-5-2005)