1986 (7) TMI 303 - AT - Central Excise

Issues Involved:
1. Confiscation and demand of value and duty for 452 bundles of polyurethane foam destroyed by fire.
2. Confiscation of 58 bundles of polyurethane foam for lack of identification marks.
3. Demand of duty for alleged clandestine removal of 12,311 kgs of polyurethane foam.

Detailed Analysis:

1. Confiscation and Demand of Value and Duty for 452 Bundles of Polyurethane Foam Destroyed by Fire:

The appellants were engaged in the manufacture of polyurethane foam. On 14-10-1981, Central Excise Officers conducted a surprise visit and found 452 bundles of polyurethane foam not accounted for in the statutory records. These bundles were seized but later handed over to the manufacturer for safe custody. The goods were subsequently destroyed by fire. The Collector demanded the value of the goods (Rs. 1,02,960) and duty on the destroyed goods. The appellants contended that the goods were not fully manufactured and thus not removed to the bonded store room, and no duty should be demanded for goods destroyed by accidental fire. The Tribunal found that since the goods were destroyed due to natural causes and not removed from the factory, no duty was demandable. The demand for the value of the goods was also deemed illegal. The Tribunal referenced the Karnataka High Court decision in the case of Shri Jagnathan Dattatraya Shah, which held that penal provisions cannot be enforced if performance becomes impossible due to an act of God. Consequently, the Tribunal set aside the Collector's order demanding the value and duty on the destroyed goods.

2. Confiscation of 58 Bundles of Polyurethane Foam for Lack of Identification Marks:

The officers discovered 58 bundles of polyurethane foam without identification marks at a godown in Daman. The appellants argued that these bundles were part of 330 bundles sold to Agfa Foam and removed under valid gate-passes. The Collector did not accept this explanation, noting inconsistencies in the appellants' statements and the lack of payment from Agfa for the stored goods. The Tribunal supported the Collector's finding, rejecting the appellants' claim of a clerical mistake and noting the improbability of 58 bundles lacking markings due to an error. The Tribunal upheld the confiscation of the 58 bundles, finding no merit in the appellants' contention that non-marking did not amount to clandestine removal.

3. Demand of Duty for Alleged Clandestine Removal of 12,311 Kgs of Polyurethane Foam:

The Collector demanded duty for 12,311 kgs of polyurethane foam allegedly removed without payment of duty. The appellants argued that these goods were covered by valid gate-passes and transported through railways. The Tribunal noted that the appellants failed to convincingly correlate the gate-passes with the railway receipts. The Collector found discrepancies in the destinations and quantities mentioned in the gate-passes and railway receipts. The Tribunal upheld the Collector's finding, agreeing that the appellants did not provide sufficient evidence to prove that the goods were duty-paid and validly removed.

Penalty:

The Collector imposed a penalty of Rs. 25,000 on the appellants for various violations, including non-accounting of 452 bundles, illicit removal of 58 bundles, and clandestine removal of 12,311 kgs of polyurethane foam. The Tribunal found no reason to interfere with the quantum of the penalty, given the deliberate nature of the violations.

Conclusion:

The appeal was allowed in part. The Tribunal set aside the Collector's order demanding the value and duty on the 452 bundles destroyed by fire. However, the Tribunal confirmed the Collector's order regarding the confiscation of 58 bundles and the demand of duty for the clandestine removal of 12,311 kgs of polyurethane foam. The penalty of Rs. 25,000 imposed by the Collector was also upheld.

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