ORDER
K.D. Mankar, Member (T)
1. The appellant’s appeal is directed against the order in appeal passed by the Commissioner (Appeals) whereunder their appeal against the order in original was rejected. Vide the order in original the appellants were held liable to duty of Rs. 14,960/- on 5 rolls of laminated HDPE woven fabrics cleared clandestinely and seized. The penalty of equivalent amount was also imposed under Rule 173Q (1) of Central Excise Rules, 1944 read with Section 11AC of the Central Excise Act, 1944 (Act). Besides the goods seized in the factory were confiscated and allowed to be redeemed on payment of a fine of Rs. 20,000/-. Laminated HDPE woven fabrics valued at Rs. 3,98,317 (5,657.60 kg.) lying unaccounted in the factory were also confiscated with a redemption fine of Rs. 40,000/- and penalty of Rs. 20,000/- was imposed on the director of the appellants company, Rs. 10,000/- on Shri Vivek Kolhatkar, supervisor and authorised signatory of the assessee company and penalty of Rs. 2,000/- on the appellants was also imposed.
2. The facts in briefs are as under:-
During a surprise check the officers intercepted a tempo which was carrying 5 rolls of HDPE woven fabrics without document which had originated from the appellants’ factory. Treating them as goods liable to confiscation for non payment duty of excise duty, the same were seized. In the follow up visit to the factory of the appellants, certain stocks of finished goods were found to be unaccounted for in RG1 register. The various defence pleas made by the appellants were not considered by the adjudicating authority as well as by the Commissioner (Appeals). Hence, this appeal before the Tribunal.
3. I have heard both the sides.
4. So far as the allegation relating to dutiabilty of 5 rolls of HDPE fabrics is concerned, from the case record itself it is obvious that, the tempo was loaded with 13 rolls and duty paiying documents were available in respect of only 8 rolls, and 5 rolls having no documents were admittedly manufactured by the appellants and on which no duty was paid. The appellants claim that in terms of Notification 4/97-CE (Sr.No. 57) they were eligible for full exemption since they had not taken any credit in respect of inputs used for manufacture of the said goods. It is pleaded by them that, they received woven HDPE fabrics, from their suppliers and they do not take any credit of duty paid on such fabrics.
5. The adjudicating authority which dealing with this issue has observed as under :-
“I found that this unit is engaged In the business form 1983 and they are required to maintain such simple records clearly and carefully when they are opting/availing exemption HDPE granules and also availing exemption under notification No. 4/97 (Sr. No. 57) for finished goods viz. Laminated HDPE fabrics Chapter 3926.90, which are manufactured out of HDPE on which modvat is not availed. But in such cases the duty is attracted on intermediate goods viz. Plastic tapes/strips falling under ch. 39.20 of Central Excise Tariff Act, 1985 and attract Central Excise duty by virtue of notfn. No. 4/97 Sr. No. (55). If they have given such separate accounts to Range alongwith monthly R.T.12 return, then they Will have to pay central excise duty on ‘plastics tapes/strips’ which is gone in such fabrics cleared under ‘Nil’ rate of duty vide notfn. No. 4/97 Sr. No. (57). Such accounts need not be separate but it should invariable be reflected in R.T. 12 returns and has to be read with R.G.1 register.”
6. I note that entire approach of the adjudicator is without any logic. The appellants themselves are not the manufactures of the base fabrics from tapes and strips. They received the base fabrics from their supplier and thereafter subjected the same to the process of lamination. Therefore, logic of collectablity of duty on the strips and tapes coming in the way of exemption to fabrics is not at all applicable in this situation. Here it is obvious that, the appellants are also paying duty where they obtained the modvat credit on the inputs. The act of the appellants of taking modvat credit on inputs for paying duty on some other products can not ipso facto lead to a conclusion that, the appellants have taken credit in respect of inputs used in manufacture of 5 rolls of HDPE laminated fabrics under seizure. The learned D.R. argued that there is an admission on the part of the appellants to the effect that, they take credit and therefore, no further verification is required, as to whether or not, the appellants have taken credit of duty paid on inputs used in the manufacture of the said seized rolls.
7. I am unable to subscribe to this line of argument. When a record such as RG 23 Part I & II are available to verify the fact of establishing availment of credit, mere statements can not be used against the appellants. Whether a person has taken modvat credit or otherwise is matter of central excise record and requires no support of any recorded statement. It has also come on record that the appellants has two channels of manufacture:- one, where the inputs credit is taken and finished products pay duty and the other, where no such credit is taken and the goods are cleared without payment of duty. In the absence of any positive evidence to point out that, the appellants had taken credit on the inputs used in the manufacture of 5 rolls of fabrics under seizure, I hold that the said goods are eligible for full exemption in terms of the Notification. It is nobodys case that the fabrics are intended for manufacture of bags/sacks. Hence the order for demanding duty, penalty and confiscation is set aside.
8. So far as the issue relating to non accountal of finished goods in the RG1 is concerned, it is an admitted position in the order-in-original itself that, in this case, the goods were removed for captive consumption for which an entry exists in the RG1 register. The adjudicating authority has made the following observations :-
“In this case the contravention of Rule 173G (4) read with Rule 53 of Central Excise Rules, 1944 are proved. The intention of Rule 173(4) ibid is that as per this rule, no goods could be consumed or disposed off prior to accounting in respective statutory register. Therefore assessee cannot absolve of the lapse of non-accounting of goods. Similarly they failed to account for production and clearance of excisable goods cleared clandestinely on 24.8.97. As held in the case of :
1) Naini Glass Works v. CCE – 1982 (10) ELT 644 (GOI)
2) Mangalore Jewellery Work v. C.C.Ex. – 1988 (38) ELT 267 (T)
3) Ganga Rubber Industries v. C.C.Ex. – 1989 (39) ELT 655 (T)
Non accounting of goods in R.G. 1 even then they are accounted for in the private records maintained by the manufacturer is an offence and penalty can be imposed Under Rule 173Q. The offence of non entry in R.g.1 is so serious that even non entry of two days product cannot be condoned because maintenance of production accounts is not only a statutory duty but a mandatory duty and non accounting in R.G.1 thus cannot be treated as a technical breach even if G.P.1 or debit entry has been made for such goods. In view of above findings the assessee is also liable for penalty Under Rule 226 of Central Excise Rules, 1944.”
9. So far as this observation is concerned, I find that distinction between “an act of non-accountal” and a “failure to make an entry” has been missed. It has to be understood that the term “non-accountal” covers a wider activity aimed at leaving no trace of the fact that excisable goods have come into existence. In this case an accountal of the goods manufactured and cleared for captive consumption has already taken place and the same were available in the R.G.1. Only the entry of finished goods manufactured from the stock captively consumed remained to be done. Hence this is a case of mere failure to make an entry in the R.G.1 account and not a case of non accountal. Therefore, I hold that there is no warrant to confiscate the goods or impose penalty.
10. In view of the discussion above, I hold that, the order for confiscating the seized good and consequent imposition of penalties is not sustainable. Therefore, all the appeals are allowed and the impugned orders passed by the lower authorities are set aside.
(Announced in Open Court)