1976 (7) TMI 71 - HC - Central Excise

Summary

Issues Involved:
1. Violation of Central Excise Rules, specifically Rule 173Q and Rule 210.
2. Discrepancies in accounting for green leaves.
3. Burden of proof in penalty proceedings.
4. Adequacy of explanation provided by the petitioner.
5. Legitimacy of the inferences drawn by the authorities.

Detailed Analysis:

1. Violation of Central Excise Rules, specifically Rule 173Q and Rule 210:
The petitioner, a UK-based Tea Company, sought to quash the order by the Central Board of Excise & Customs imposing a penalty of Rs. 2000 under Rule 173Q for contravention of the Central Excise Rules, 1944. The Board reduced the penalty from Rs. 20,000 to Rs. 2,000 and set aside a penalty of Rs. 1,000 under Rule 210 imposed by the Collector of Customs.

2. Discrepancies in accounting for green leaves:
An audit in 1968 revealed discrepancies in the accounting of 44512 kg of "plucked green leaves" which were not accounted for in the Central Excise Green Leaf Register. The breakdown of unaccounted leaves spanned from June to November 1968. The inference drawn was that 9980 kg of manufactured tea had been removed from the factory without duty payment, violating Rule 173Q(a) and 173Q(b).

3. Burden of proof in penalty proceedings:
The petitioner argued that the burden of proof was on the department, citing that penalty proceedings are of a "quasi-criminal" nature. The Board acknowledged this but noted that the standard of proof in indirect tax cases is not as stringent as in criminal cases. The adjudicating officer can act on circumstantial evidence, which was found sufficient in this case.

4. Adequacy of explanation provided by the petitioner:
The petitioner attributed the discrepancies to clerical mistakes and inflated figures by a Mohurer responsible for green leaf weighment. However, the Collector found that the petitioner did not avail the opportunity to inspect records and failed to provide a satisfactory explanation for the unaccounted leaves. The Mohurer's explanation of manipulating records to show a better ratio did not rebut the inference that the leaves were used in manufacturing without proper accounting.

5. Legitimacy of the inferences drawn by the authorities:
The authorities concluded that the unaccounted green leaves were indeed used in manufacturing, based on circumstantial evidence and the lack of a credible explanation from the petitioner. The burden of proof, while initially on the department, shifted to the petitioner to explain the discrepancies, which they failed to do. The High Court upheld this inference, noting that the findings were based on legitimate and necessary inferences from admitted facts.

Conclusion:
The High Court dismissed the writ petition, holding that the petitioner failed to provide a sufficient explanation for the discrepancies and that the department had adequately discharged its burden of proof. The petition was deemed devoid of merits and dismissed with costs.