1993 (10) TMI 148 - AT - Central Excise

Issues Involved:

1. Maintenance of RG 1 register varietywise or sub-itemwise.
2. Seizure of assessable goods accounted for in RG 1.
3. Existence of shortages or excesses in glass and glassware.
4. Justification of levy of redemption fine and penalty.

Issue-Wise Detailed Analysis:

1. Maintenance of RG 1 Register Varietywise or Sub-itemwise:

The appellants contended that it was impractical to maintain separate accounts in RG 1 for each item of glass and glassware due to the large variety/sizes manufactured. Representations were made to the Central Excise authorities explaining these difficulties. The Collector issued a Trade Notice on 20-10-1990 allowing factories manufacturing more than 100 varieties/sizes of glass and glassware to group items according to broad categories and maintain RG 1 and stock cards for each group separately. Therefore, the finding of the Collector that the appellants were required to maintain accounts in RG 1 and stock cards varietywise was deemed unsustainable.

The Departmental Representative argued that the seizure/offence case was made in May to June 1980, and the Trade Notice No. 105/30 issued on 20-10-1980 was effective only from that date.

2. Seizure of Assessable Goods Accounted for in RG 1:

The appellants argued that the verification done on 3-6-1980 was not final, and a revised verification on 5-6-1980 should be considered. The revised verification showed different figures for excesses and shortages. They contended that only goods found in excess should have been seized.

The Departmental Representative countered that due to the failure to maintain varietywise RG 1 and lotwise stock cards, it was not possible to locate actual shortages and excesses. Therefore, the entire stocks were seized on a reasonable belief that the party had intentionally not accounted for the excess stock with an intent to evade duty.

3. Existence of Shortages or Excesses in Glass and Glassware:

The appellants contended that the real point was about the shortages, which were not supported by any evidence. The revised verification report indicated a shortage of 674 doz. and 8 pcs. of glass and glassware. The Collector valued the shortage without any basis, and the value of 674.8 dozen pieces of laboratory-ware found short was Rs. 16,700/-.

The Department argued that the Collector was justified in determining the value of the goods based on the highest price among the goods of that variety manufactured by the factory.

4. Justification of Levy of Redemption Fine and Penalty:

The appellants argued that the mistake was due to the impracticality of maintaining varietywise accounts and that there was no positive evidence of clandestine removal. They cited decisions in previous cases to argue that neither goods could be confiscated nor redemption fine imposed if goods were released provisionally against a bond.

The Department justified the imposition of fine and penalty, stating that sufficient evidence showed that goods were found in excess and shortage and removed without payment of duty with an intent to evade duty.

Judgments:

Majority View (Remand):

The majority found that while the Department was right in observing that the party was required to maintain varietywise accounts for the period in question, the difficulties explained by the appellants and the subsequent Trade Notice justified that redemption fine was not warranted unless clandestine removal was proved positively. There were discrepancies between verification reports dated 2/3-6-1980 and 5-6-1980. The Adjudicating Authority proceeded to determine the quantum of shortage and value based mainly on the 2-6-1980 report without considering the 5-6-1980 report. The matter required reconsideration to determine the shortage with reference to the verification reports and to determine the value of the goods after giving an opportunity to the appellants. The appeal was allowed by remand.

Vice President's View (No Remand):

The Vice President observed that maintaining accounts varietywise was impractical and supported the appellants' contention. However, the Departmental Officers could not verify the correctness of stocks and accounts without such maintenance. The Vice President noted that the Collector referred only to the stock-taking of 3rd June 1980, ignoring the verification from 2-6-1980 to 5-6-1980. Minor excesses and shortages, particularly breakages, were probable in a glass factory, and the appellants were entitled to the benefit of doubt. The Vice President did not favor remanding the case due to the impracticality of conducting an enquiry after 12 years and reduced the penalty from Rs. 1 lakh to Rs. 25,000/-.

Final Order:

In view of the majority opinion, the matter was remanded for re-adjudication with the direction that the shortage and value of the goods found short should be re-determined, and the case decided after giving an opportunity of personal hearing to the appellants.

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