ORDER
J.H. Joglekar, Member (T)
1. M/s. Vardhman Polymer Industries were a small scale manufacturer making plastic moulded parts for domestic mixer. They were not licensed under the Central Excise law nor had they filed any declaration claiming the benefit of any Notification. On receipt of intelligence, their premises were searched. It was found that in a majority of cases, the goods were delivered under “kachha delivery challan”. Goods totally valued at Rs. 7,61,406 were seized. Accounts of the manufacturers were also seized. Statements of concerned partners and buyers were recorded. At the conclusion of the investigations, show cause notice dated 19.4.1993 was issued. It was alleged that duty amounting to Rs. 30,30,170/- was short levied on account of goods clandestinely cleared by M/s. Vardhman Polymer Industries. It was alleged that the seized goods were liable to confiscation. M/s. Vardhaman Polymer Industries and its partners S/Shri A.D. Jain and P.D. Jain were allegedly liable to penalty under Rule 173Q and 209A respectively. The buyers of the parts so made and clandestinely cleared without payment of duty were also alleged to be liable to penalty under Rule 209A of the Central Excise Rules, 1944.
2. After hearing the concerned persons, the Commissioner passed the impugned order confirming duty allegedly short levied and imposing penalty of Rs. 10 lakhs on M/s. Vardhaman Polymer Industries and of Rs. 5 lakhs each on two partners S/Shri P.D. Jain and A.D. Jain. The seized goods were confiscated but were allowed to be redeemed on payment of fine of Rs. 2 lakhs. On all the buyers respondents to the show cause notice penalties were levied. On S/Shri Vinod Agarwal and J.N. Agarwal, penalty of Rs. 2 lakhs each was levied. On all other buyers penalty imposed was Rs. 50,000/- each. M/s. Vardhaman Polymer Industries, its partners S/Shri P.D. Jain and A.D. Jain have filed appeals against this order. The following buyers have also filed the appeals:
Shri A.D. Dagh
Shri Vinod Agarwal,
Shri Rajesh O. Mehta
Shri Sampatraj D. Jain
Shri J.N. Agarwal
Shri Jayantilal A. Shah
Shri Nemi Devdar
3. All the appellants have also filed applications for waiver of pre-deposit and stay of recovery of sums confirmed and imposed in the impugned order.
4. At the time of hearing of the arguments on the stay applications, M/s. Vardhaman Polymer Industries were represented by Shri A.V. Phadnis along with Shri G.C. Biradar, advocates. The partners of Shri Vardhaman Polymer Industries viz. P.D. Jain and A.D. Jain were represented by Shri Biradar. Shri Biradar also represented the buyers Shri Rajesh O. Mehta, Sampatraj D. Jain and J.N. Agarwal. Shri Gursharan Singh, Consultant was appearing for S/Shri A.D. Dagh, Jayantilal A. Shah (Aidalmallji) and Nemi Devdar. Shri K.V. Sahashrabudhe, Consultant represented Shri Vinod Kumar Agarwal. Revenue was represented by Shri K.L. Ramtake, JDR.
5. On behalf of M/s. Vardhaman Polymer Industries Shri Phadnis submits that out of the 66 buyers who purchased the goods manufactured by M/s. Vardhaman Polymer Industries, the department had questioned only 19 persons. He submits that 9 of these buyers had denied having purchased any goods from M/s. Vardhaman Polymer. It is his submission that the department had erred in calculating the value of the goods allegedly cleared without payment of duty on the basis of the Kachha Delivery challans. It is his submission that the kachha delivery challan only reflects the placement of the order and not the actual delivery of the goods. It is his further submission that the ld. Commissioner had erred in not extending the benefit of the concerned notifications applicable to the small scale industries on wrong application of the Supreme Court judgement. It is his submissions that at the material time the unit was possessing the SSI registration. It is his submission that when the goods so cleared are calculated in an appropriate manner, the duty short levied would amount to Rs. 80,000/-. It is his claim that the ld. Commissioner had not taken cognizance of the submissions made and points of facts before him and on this count, his order was bad in law and deserved to be set aside. On the point of financial hardship, Shri Phadnis cited the final accounts for the year 1996-97 and the unaudited accounts for the year 1997-98.
6. Shri Biradar arguing for the partners adopts all the arguments of Shri Phadnis. He further states that in the case of the partnership firm, the firm and the partners could not be penalised in the same proceedings for which he relies upon the Tribunal Judgment in the case of Ashok India Engineering Works v. CCE . He submits that the payment of penalty to the department would cause undue hardship but concedes that his clients have not filed affidavit on record to this effect.
7. Arguing for the buyers, Shri Biradar submits that Shri Sampatraj Jain was not a noticee in this show cause notice at all; although he has filed reply and that he has been penalised. As regards Shri Agarwal and Shri Rajesh O. Mehta, he has stated that they had denied having received any goods from M/s. Vardhaman Polymer Industries.
8. Shri Gursharan Singh states that his client Jayantilal A. Shah had refused having received any goods from M/s. Vardhaman and Shri A.D. Dagh had received the goods and had made payment under cheque. Neither Shri Dagh nor Shri Nemi Devdar who had admitted to having purchased the goods had stated that they had knowledge that the goods had not suffered duty. Shri Gursharan Singh states that these two persons were buyers and they presumed that since the goods were coming from the small scale sector, it must have been exempted from payment of duty. On this ground he submits that conscious knowledge could not be attributed and penalties imposed could not be sustained.
9. Shri K.V. Sahashrabudhe makes the same claim for Shri Vinod Kumar Agrawal. He further states that whereas his client had purchased the goods at the value of Rs. 12,000/-, the penalty imposed upon him was Rs. two lakhs.
10. We have carefully considered the various submissions made.
11. The calculation of the duty allegedly made was on the basis of certain accounts maintained by M/s. Vardhaman Polymer Industries. The accounts showed details of the parts despatched by M/s. Vardhaman Polymer Industries with date and challan number under which the parts were sent. The name of the party was written in cryptic manner “Sonali” “Priya” or “Vimal”. In some cases the name of the party was represented by town names. In some cases the name of the party was written as “cash”. The identity of the various persons so named came from the statement of Shri P.D. Jain. We have considered various submissions made by Shri Phadnis including that of the capacity of the machinery installed. We also heard the submissions that the electricity consumed would not justify this amount of production. We have also heard his claim on the inadequacy of the investigation and the denial of the fact of purchase by certain buyers. In our opinion, at this stage of prima facie consideration, this argument cannot be considered. Whether various submissions made by the applicants were considered by the ld. Commissioner is also a point to be taken up at the time of final hearing of the case. It is not that the accounts on which the estimates were made were not maintained by the manufacturers. If it is the claim that the kachha invoices were substituted by the applicants, then the contrary entry should exist in the register showing clearance under the kachha receipts. In the alternative, there should be another register showing clearance under the pucca register and their co-ordination with the kachha receipts earlier issued and subsequently cancelled. In the absence of such evidence, prima facie evidence relied upon by the department is sufficient.
12. In support of the financial condition of the manufacturer, reliance has been placed on outdated, unaudited and unauthenticated final accounts. As regards the partners, there is even less justification. There are no affidavits nor there any income tax returns placed on records to show that the financial position of the partners was such as to cause undue hardship if they are called to deposit. The case law cited, to our mind, does not give any ratio applicable to the present case. It is a clear admission on the part of Shri A.D. Jain of his awareness of the wrong practice adopted by him. On consideration of all these aspects, we direct M/s. Vardhaman Polymer Industries to deposit a sum of Rs. 5,00,000/- (Rupees Five lakhs) towards duty and Rs. 3,00,000/- (Rupees three lakhs) towards penalty. On this deposit being made, the need to deposit the reminder of the penalty imposed on the firm as well as on the partners and the reminder of the duty shall stand waived. They are granted time of ten weeks from the date of receipt of this order for making the deposit.
13. As regards the buyers, we find that in the impugned order, the Commissioner has not brought out the part played by the individual buyers in rendering them liable to penalties. In certain cases, some buyers have refused to have purchased any goods from M/s. Vardhman Polymer Industries. After reaccouting this submission, the Commissioner has merely proceeded to impose penalties upon them. We also take cognizance of the submissions made on behalf of the buyers. For sustaining penalty under Rule 209A, it is necessary to establish that the persons so made liable had dealt with certain goods in the knowledge or in the reasonable belief that the goods were liable to confiscation. In the absence of such evidence, penalty cannot be justified. We, therefore, grant unconditional stay and waiver of the penalty imposed upon the buyers.
14. Compliance report on 10.11.1999.
(Pronounced in court).