ORDER
T.P. Nambiar, Member (J)
1. This appeal is filed by the appellants against the orders passed by the Collector of Central Excise, Bangalore in Order No. 63/93, dated 27-7-1993. The facts of the case are that acting on intelligence that excisable goods were being transported in a vehicle bearing Registration No. CAW 229, without payment of Central Excise duty, the officers of Central Excise (Preventive) VI Division, Bangalore were waiting at. Madiwala Check post on the Hosur Road, Bangalore at 17.30 hours on 30-9-1992 along with witnesses. On noticing the said vehicles the officers intercepted the same and on verification of the consignment in the said vehicle they found 996 pairs of shoes packed in 83 cartons, 6 pairs of ‘Adidas’ shoes, 10 Adidas empty cartons and 370 pairs of Adidas insoles and 21 pairs of Adidas socks. The driver of the vehicle produced the following documents when demanded by the Officers :
(i) Central Excise gate pass 1 No. 107, dated 30-9-1992 for 996 pairs of shoes,
(ii) M/s. Star Shoes (I) Pvt. Ltd., factory gate pass No. 394, dated 30-9-1992 for 6 pairs of Adidas Shoes.
(iii) Despatch Notes No. 47, dated 30-9-1992 in duplicate for 83 cartons (996) pairs.
(iv) K.S.T. Form No. 39, dated 30-9-1992.
(v) M/s. Star Shoes (I) Pvt. Ltd., factory gate pass Nos. 392 and 393, dated 30-9-1992 for 10 empty Adidas Cartons, 370 pairs of Adidas Insoles and 21 pairs of rejected Adidas Socks (insole).
2. No Central Excise gate pass for 6 pairs of Adidas Shoes was produced. Further on immediate verification of the factory records revealed that no duty had been debited in respect of the goods covered by GP1 No. 107, dated 30-9-1992. The entire consignment alongwith the transport vehicle bearing No. CAW 229 was therefore seized under a Mahazar dated 30-9-1992 and was taken to the custody of the Department. Further, at the factory premises, the Officers noticed that the assessee had not accounted the production and clearance in their statutory production register viz., RG 1 register from 18-9-1992 onwards. Therefore, the physical stock available in the factory was verified and found the balance as follows :
(i ) Match (Adidas Shoes) - 2201 pairs in 119 Cardboard boxes
and 121 pairs in individual cartons.
(ii) Ultimo (Power) Shoes - 756 pairs in 52 cardboard boxes and
132 pairs in individual cartons.
2.1 Apart from the above, there was a stock of 13.5 pairs of cut shoes of Ultimo (Power) variety and 132.5 pairs of cut shoes of Match II (Adidas) variety which tallied with the RG 1 Register.
Then the factory stock was reconciled with the RG 1 Register as detailed below:-
Ultimo Match - II
(i) Opening Balance as on 19-9-1992 as 2500 pairs 6221 pairs
accounted in RG 1 register.
(ii) Production as per daily packing 504 pairs 288 pairs
statement from 19-9-1992 to 30-9-1992
SI. Nos. 235 to 238.
Total
2709 pairs 6509 pairs
LESS:
Clearance effected as per gate passes issued 1452 pairs 3120 pairs
from 19-9-1992 to 30-9-1992 - GP 1
SI. Nos. 102 to 107.
Closing stock which should have been 1257 pairs 3389 pairs
available as on 30-9-1992.
Physical stock of shoes available as on 756 pairs 2322 pairs
30-9-1992.
Shortage. 501 pairs 1067 pairs
3. From the above, it was observed that the physical stock of shoes available did not tally after reconciliation, and the shortage of 501 pairs of Ultimo and 1067 pairs of Match-II varieties noticed was admitted by Shri S.V. Desai, Manager Accounts & Administration who was present during the course of visit to the factory by the Officers. Therefore, the records being incriminating in nature were seized under Mahazar dated 30-9-1992. The duty on the goods found short worked out to Rs. 1,21,405.45; BED and Rs. 18,210.75 SED. M/s. Star Shoes (I) Pvt. Ltd., and the Driver Shri S. Abdul Razak, got their goods and vehicle (which were seized) released provisionally on executing the B. 11 Bond with Bank Guarantee/Cash Security. Verification of RG. 1 revealed ~P that M/s. Star Shoes had not entered the particulars of any goods manufac- ‘ tured and cleared by them between 19-9-1992 to 30-9-1992. Verification also revealed that Inner soles/socks are not leviable to duty in view of the exemption provided under Notification No. 49/86, dated l’0-2-1986 as amended.
4. From the foregoing it appeared that M/s. Star Shoes have removed excisable goods viz., 996 pairs of shoes valued at Rs. 4,05,262.80 without accounting and without payment of Central Excise duty of Rs. 81,053/- BED and Rs. 12,158/- SED and further removed 6 pairs of shoes totally valued at Rs. 2,277.96, without accounting, without raising a gate pass, without payment of duty of Rs. 455.00 BED and 68.35 SED, in contravention of the provisions of Rules 9(1), 52A, 53 read with 226,173F and 173G of Central Excise Rules,1944 for which reason the abovesaid goods were seized alongwith the vehicle , bearing Registration No. CAW 229 valued at Rs. 52,000/-. It further appeared “* that M/s. Star Shoes (India) Pvt. Ltd., Bangalore, have clandestinely removed 501 pairs of Ultimo (Power) Shoes and 1067 pairs of Match-II (Adidas) shoes valued Rs. 4,05,097.22 which were found short, in contravention of the provisions of Rules 9 (1), 52A, 173F and 173G of Central Excise Rules, 1944, and it further appeared that M/s. Star Shoes have not accounted the goods manufactured and cleared by them from 19-9-1992 to 30-9-1992, in the statutory RG. 1 register in contravention of the provisions of Rules, 53 read with 226 of Central Excise Rules, 1944.
5. It also appeared that Shri S. Abdul Razak, Owner-cum-Driver of Vehicle No. CAW 229 has concerned himself in transporting the non duty paid -^ shoes as detailed in para. 1 above, which he had reasons to believe were liable for confiscation from M/s. Star Shoes, Bangalore, and thereby he appeared to have committed the offences specified in Rule 209A of Central Excise Rules, 1944.
6. Hence, it appeared that 1002 pairs of shoes totally valued at Rs. 4,07,540.76 seized on 30-9-1992, are liable for confiscation under Rule 173Q(1) of Central Excise Rules, 1944 and the duty amount of Rs. 2,02,914.05 BED and SED Rs. 30,437.10, being the duty involved on the goods removed without payment of duty appeared payable in terms of Rule 9 (2) of Central Excise Rules, 1944 read with Section 11A of Central Excises & Salt Act, 1944. It also appeared that M/s. Star Shoes, Bangalore and Sri S. Abdul Razak were liable for penal action under Rule 173Q(1) of Central Excise Rules, 1944.
7. Therefore a Show Cause Notice was issued to M/s. Star Shoes, Bangalore, vide this office file No. V/64/15/126/92-C.l, dated 10-3-1993, asking them to show cause as to :-
(i) Why 1002 pairs of shoes totally valued at Rs. 4,07,540.76 seized on 30-9-1992, should not be confiscated under Rule 173Q(1) of Central Excise Rules, 1944;
(ii) Why the amount of Rs. 2,33,351.15 (Rupees Two lakhs thirty three thousand three hundred and fifty one and Paise fifteen only) (BED Rs. 2,02,914.05 + SED Rs. 30,437.10), being the Central Excise duty involved on the goods removed without payment of duty, should not be demanded from them under Rule 9 (2) of Central Excise Rules, 1944 read with Section 11A of Central Excises & Salt Act, 1944; and
(iii) Why a penalty should not be imposed on them under Rule 173Q(1)/226 of Central Excise Rules, 1944.
8. The owner-cum-Driver Shri Abdul Razak was issued with a show cause notice as to why the tempo should not be confiscated. In their reply, the appellants denied the allegations in the show cause notice. With respect to the allegations of the removal of 501 pairs of Ultimo and 1067 pairs of Match II ‘Adidas’ shoes without raising Central Excise Gate passes, it was pointed out that in the statement of Shri S.B. Desai dated 1-10-1992 he has clearly pointed out that the physical stock has been verified with the books of account and there might be some arithmatic mistake which required to be reconciled. Finally, after the personal hearing, the impugned order was passed wherein 1002 pairs of shows valued at Rs. 4,07,540.76 were confiscated and it was allowed to be redeemed on payment of redemption fine of Rs. 2,00,000/- and Central Excise duty of Rs. 2,33,351.15 was also demanded. A penalty of Rs. 2,00,000/-was imposed on M/s. Star Shoes (India) Ltd., the appellant.
9. The learned Advocate Shri Chandrakumar appearing for the appellants contended mat the demand of duty of Central Excise amounting to Rs. 2,33,351.15 is totally without application of mind to the facts of this case. He stated that the duty has been discharged in respect of 1002 pairs of shoes under seizure vide SI. Nos. 52 and 53 in RG 23A Part-II which was not taken into consideration by the Collector. He also stated that the duty demanded is otherwise illegal and untenable. He drew our attention to paras 3,4 and 16 of the order of the Collector and contended that there was non-application of mind. With respect to confiscation of 1002 pairs of shoes and imposition of redemption fine of Rs. 2,00,000/-, he has stated that the same is not called for in the circumstances of the case inasmuch as all the documentary evidences were produced at the time when the tempo was apprehended. He, therefore, stated that none of the documents relied upon in the show cause notice reveals that there was any intention on the part of the appellant to evade payment of duty of Central Excise, warranting confiscation of 1002 pairs of shoes and imposition of fine in lieu thereof. He pointed out that 1002 pairs of shoes were seized under Mahazar dated 30-9-1992.
Since they were released and re-despatched on 14-10-1992, the duty of Central Excise was accordingly debited. He further stated that the duty demanded by the Collector on the alleged shortage of 501 pairs of Ultimo (Power Shoes) and 1067 pairs of Match-II (Adidas) is also not warranted in the circumstances of this case. In this connection he pointed out that the Collector failed to verify the accounts and the statements produced along with the reply to the show cause notice and failed to consider the re-conciliation in its proper perspective. He also pointed put that reliance placed on the working made by the Central Excise Officers on 30-9-1992 for the period from 19-9-1992 to 30-9-1992 to arrive at the shortage alleged is totally erroneous. He further pointed out that the observations of the learned Collector that the charge of clandestine removal is established, is not supported by any evidence. It overlooks the reconciliation of the uppers produced before the Collector along with the reply to the show cause notice and explain in the course of hearing. It was his -/, contention that the burden is on the Department to prove the clandestine / removal which they have not proved in this case. He also stated that it is not the case wherein any penalty should be imposed on the appellants. He also stated that the confiscation of goods in question also is not warranted.
10. The learned DR, Shri S. Murugandi, appearing for the respondents contended before us that it is admitted by the appellants that the duty in respect of the seized goods had been paid only when they were re-despatched on 14-10-1992 vide Gate Pass Nos. 158 and 159, dated 14-10-1992 by debit entry RG 23A Part-II at SI. Nos. 52 and 53. He therefore contended that this purely goes to prove that the appellants had contravened provisions of Rule 9(1) of the Central Excise Rules as no duty was paid at the time and place of removal of the goods on 30-9-1992. He further pointed out that Rule 9 of the Central Excises Rules, 1944 prohibits removal of excisable goods from the place of their £ manufacture unless the duty leviable thereon is paid. He also stated that under Rule 173G it is mandatory on the part of the assessee to determine the duty liability for each consignment and discharge the same by way of debit entry in the account current or current account as the case may be. In this case the duty was paid only when the goods were provisionally released. Therefore, he stated that since duty was not paid on 30-9-1992 when the goods were removed, they are liable for confiscation and the appellant is liable to be penalised under Rule 173Q(1) of the Central Excise Rules. With respect to the other contentions, he reiterated the reasonings in the impugned order.
11. We have considered the submissions of both the sides. The first point which arises for our determination is whether the confiscation of 1002 pairs of shoes is in accordance with law. The main contention of the learned Senior Advocate Shri Chandrakumar is to the effect that all the necessary documents for carrying these goods in the lorry have been prepared by the appellants but the debit of duty was not made in the proper register due to the fact that their Accountant who was maintaining the statutory records was on leave due to illness. Therefore, he had contended that there was no intention to evade payment of duty and the question of confiscation does not arise. We have considered the submissions of both the sides. It is now an admitted fact that duty in respect of these seized goods have been paid only when they were re-despatched on 14-10-1992 vide Gate Pass Nos. 158 and 159, both dated 14-10-1992. At the time of removal of the goods on 30-9-1992, the duty leviable thereon was not paid by the appellants. Under Rule 9 of the Central Excise Rules, the excisable goods from one place can be removed only after duty leviable thereon is paid. It is for the appellants to determine the duty liability for each consignment and discharge the same by way of debit entry in account current or current account as the case may be before removal of the goods. The mere fact that all the necessary documents for removal of the goods were prepared and given to the Driver of the lorry is not sufficient ground to hold that the appellant had removed the goods legally. The only ground urged by the learned Advocate is that as the Accountant was ill, the accounts were not written from 19-9-1992. There is hardly any justification for the appellants to remove the goods without discharging the duty liability by way of debit entry in account current or current account as the case may be. If the duty was not debited in accordance with law, then the goods should not have been removed by the appellants. It was contended before us that there is no allegation that the appallants wanted to be the same set of documents for the second time to remove such goods. There need not be any such allegation for confiscation of the goods since the appellant has contravened Rule 9 by not making the debit entry in account current for discharging the duty liability before removal of the goods. Rule 9 of the Central Excise Rules read with Rule 173G comes into operation and the goods certainly becomes liable for confiscation. Therefore, the confiscability of the goods in question cannot be disputed merely on the ground that necessary transport documents have been given to the possession of the Driver. However, this is a circumstance which can be taken into consideration for the quantum of redemption fine. It is further seen that on this account, the appellant is liable to be penalised under Rule 173Q(1) of the Central Excise Rules, 1944. Under Rule 173Q(1), if the appellant has contravened any rules, they are liable for penalty and it is not necessary for the Department to separately prove that they had any intention to evade the payment of duty. The very contravention of the rule itself is sufficient to impose penalty on the appellant.
12. In view of the above fact we are of the view that the confiscation of the abovesaid goods is proper. However, in view of the circumstances as narrated above, we reduce the redemption fine to a sum of Rs. 1,00,000/-(one lakh). But for this modification the appeal on this ground is otherwise rejected.
13. The next point for our determination is whether the demand of duty of excise to the extent of Rs. 2,33,351.15 is in accordance with law and whether the imposition of penalty on this account is justified. In this connection, we note that the appellant’s factory stock was reconciled with the RG 1 Register. In the impugned order, the learned lower adjudicating authority has stated about the facts as follows :-
“Then the factory stock was reconciled with the RG I Register as detailed below:
Ultimo Match - II
(i) Opening Balance as on 19-9-1992 as 2500 pairs 6221 pairs
accounted in RG 1 register.
(ii) Production as per daily packing 504 pairs 288 pairs
statement from 19-9-1992 to 30-9-1992
SI. Nos. 235 to 238.
Total
2709 pairs 6509 pairs
LESS:
Clearance effected as per gate passes issued 1452 pairs 3120 pairs
from 19-9-1992 to 30-9-1992 - GP 1
SI. Nos. 102 to 107.
Closing stock which should have been 1257 pairs 3389 pairs
available as on 30-9-1992.
Physical stock of shoes available as on 756 pairs 2322 pairs
30-9-1992.
Shortage. 501 pairs 1067 pairs
It is thus seen that the opening balance as on 19-9-1992 with respect to Ultimo was taken as 2500 pairs. But the learned Advocate Shri Chandrakumar drew our attention to the opening balance as on 19-9-1992 in the RG1 Register which is produced at page 329 of the paper book. On a perusal of the same, we find that the total quantity mentioned therein is only 2218.5. Therefore, this figufe primafacie is incorrect. The learned JDR also is unable to explain this discrepancy. It is, therefore, seen that in this regard there is lack of application of mind. Further it is seen that the appellant has tried to explain the shortages and the appellant has also tried to reconcile the stocks. In their reply to the show cause notice, the appellants at para (b) had stated as follows :
“(b) As regards the allegations that the noticee company have removed 501 pairs of ‘Ultimo’ (Power Shoes) and 1067 pairs of Match – II (Adidas) shoes without raising Central Excise gate passes and without payment of duty, the noticee company submit and state that there has been no clearance of the said shoes as can be seen from the statement of accounts furnished herewith. Moreover, in the statement recorded from Mr. S.B. Desai on 1-10-1992, he has positively pointed out that the physical stock verified with books of accounts was erroneous and that there might be arithmatic mistake – accounting mistake or the production in RG 1 might have been recorded in excess due to which the stock shown in RG 1 appear to be more than the physical stock. It was also stated in the statement, that stock has to be reconciled. Accordingly, the noticee company prepared a reconciliation of the stock available as on 1-4-1992 in accordance with the registers and also the stock available on 30-9-1992 taking into account the total number of uppers supplied to the factory and the total number of shoes cleared from the factory. On reconciliation of the stock, it has revealed that the noticee company has taken the stock twice with regard to 501 pairs of Ultimo and 1067 pairs of shoes of Match – II Adidas. The statement of uppers received during the period and also the statement of opening stock as on 1-4-1992, the number of uppers used during the period 1-4-1992 to 30-9-1992 is produced herewith to demonstrate as to how the entries have been taken in RG Register twice. The main reason for entering the entries twice is clear from the letter dated 29-2-1988 wherein the noticee company had requested the Assistant Collector to permit them to follow the method of maintaining two RG Registers by the company, viz: one for the all shoes manufactured and another for the shoes which are liable for inspection by Bata India Ltd. Though the noticee had sought for the permission of the department to maintain two RG 1 registers, no such permission was granted in writing, but however, the noticee started maintaining two RG 1 registers till 31-3-1992. On 1-4-1992 the entries in the two RG 1 registers were merged. While merging the entries the shoes which were required to be inspected and tested by Bata India Ltd., were also taken into account as an opening stock which covered 501 pairs of Ultimo shoes and 1067 pairs of Adidas shoes. These were also shown in the accounts as the shoes pending test and inspection in the pending entry section. Thus these shoes were entered twice, once while taking the opening stock as on 1-4-1992 and second time when these shoes were duly inspected and approved by Bata India Ltd. after 1-4-1992. Thus there is a clear case of double entry of the said shoes made in RG 1 Register which has resulted in the issuance of show cause notice. The statement of account along with reconciliation statement are produced herewith for necessary verification. Hence in the said circumstances the charge relating to clandestine clearance of 501 pairs of Ultimo shoes and 1067 pairs of Adidas shoes is liable to be dropped in the interest of justice.”
14. It is, therefore seen that the statements of accounts along with the reconciliation statements were produced before the adjudicating authority for necessary verification. But the adjudicating authority in the impugned order has not verified the reconciliation statement and he has not given any findings in this regard.
15. In order to appreciate the contention of the appellant, we reproduce the relevant portion of the order of the adjudicating authority in this regard, the same reads as follows:
“It is therefore evident that the entire exercise of accounting reconciliation was attempted to by the assessee only in order to make up for the shortages, which were not only accepted earlier but was also admitted.”
However, he has not analysed the reconciliation statement and has not given any conscious finding as to why it could not be accepted in arriving at a finding. He should give his supporting reasons so that the Tribunal, in appeal could assess as to whether the reconciliation statement would be accepted or not. In order to assess the same, there should be speaking order in this regard by the adjudicating authority stating the reasons why and how the reconciliation statements could not be accepted. In this view of the matter we hold that as far as the second issue is concerned, the demand of duty is not in accordance with law. But the matter requires to be remanded for this purpose for giving an opportunity to the appellants to submit the appellant’s case with respect to the reconciliation and thereafter the adjudicating authority could consider the arguments of the appellant and then can pass a speaking order in this behalf by mentioning as to how the reconciliation statement is not acceptable and in doing so, the adjudicating authority should take into consideration the reasons furnished by the appellant after discussing the same.
16. As far as the third point is concerned, we have to find out whether penalty is imposable on the appellant. We have already held that penalty is imposable under [Rule] 173Q(ii) but penalty on the grounds of clandestine removal also is liable to be imposed if the clandestine removal is established. Since we are remanding the case on this issue of clandestine removal, the penalty ultimately which has to be imposed on the appellant also depends upon the finding of clandestine removal. That being the case, we leave it to the adjudicating officer to impose penalty on the appellant by taking into consideration his findings in the de novo adjudication with respect to the clandestine removal, for which purpose the case is now remanded. The appeal is therefore, disposed of in the above terms.