2001 (2) TMI 676 - AT - Central Excise

Summary

Issues Involved:
1. Seizure and confiscation of 270 pieces of processed fabrics.
2. Alleged clandestine removal of processed fabrics.
3. Reliability of private records (dyeing note book and production slips).
4. Imposition of penalty and confiscation under Central Excise Rules.
5. Demand for additional Central Excise duty.

Issue-wise Detailed Analysis:

1. Seizure and Confiscation of 270 Pieces of Processed Fabrics:
The Central Excise officers conducted a search on 12-4-91 and seized 270 pieces of processed fabrics found in the finishing room, which were not accounted for in the RG 1 register. The appellant argued that these goods were not in a marketable condition and were to be accounted for at the end of the day or the next morning. The court found that the seizure was vexatious as the goods were still in the factory premises and not ready for dispatch. The explanation provided by the director about the non-accounting in RG 1 was considered cogent, and the seizure and confiscation were deemed illegal.

2. Alleged Clandestine Removal of Processed Fabrics:
The department alleged that the appellant clandestinely removed 431,834.25 L. Metres of processed fabrics without payment of duty, based on 27 production slips and a dyeing note book. The appellant denied knowledge of these documents and argued that there was no corroborative material to support the charge of clandestine removal. The court noted that the statements of suppliers and the dyeing master supported the department's case, but the evidence was not sufficient to conclusively prove clandestine removal beyond reasonable doubt. The court emphasized that the degree of evidence required for such a charge must be fulfilled, and the department failed to provide direct and tangible evidence.

3. Reliability of Private Records (Dyeing Note Book and Production Slips):
The dyeing note book and production slips were seized from the appellant's premises and contained details of processed fabrics. The appellant argued that these were unauthorized records and not maintained under any instructions or directions. The court found that the dyeing note book and production slips were not reliable evidence as the author of the documents was not examined, and the statements of the dyeing master and suppliers did not conclusively support the entries. The court held that private records maintained by any employee or third party without the authority of the mills could not be considered sufficient evidence against the mills.

4. Imposition of Penalty and Confiscation under Central Excise Rules:
The department imposed penalties on the mills, directors, and merchant manufacturers under Rule 173Q(1) and Rule 209A of the Central Excise Rules. The court referred to the Delhi High Court judgment in Pioneer Silk Mills v. UOI, which barred penalty and confiscation when additional duty is chargeable on man-made fabrics. The court found that the department failed to establish the charges of clandestine removal and unauthorized processing, and therefore, the imposition of penalties and confiscation could not be sustained.

5. Demand for Additional Central Excise Duty:
The department demanded additional Central Excise duty of Rs. 7,01,966.03 on the alleged clandestinely removed fabrics. The court held that the demand for additional duty was justified based on the evidence available, but the penalties and confiscation were not. The court allowed the appeal in part, setting aside the order of confiscation and penalty but confirming the demand for additional duty.

Conclusion:
The court set aside the impugned order regarding confiscation and penalty, confirming the demand for additional duty. The appeal was allowed in part, with consequential relief according to law.