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TMI Blog1986 (7) TMI 254X X X X Extracts X X X X X X X X Extracts X X X X ..... of duty demanded in the show cause notice dated 12th May, 1975. According to the learned Advocate the first show cause notice issued on 12th May, 1975 was in fact incomplete and it is only with the issue of the subsequent notice of 10th February, 1977 that the show cause notice can be considered to have been finalised. Accordingly, limitation should count from the date of the corrigendum and demand for the entire period would be barred. In this connection Shri Narasimhan has cited the decision in the case of Radhika Vitamolt v. Collector of Central Excises, Meerut - 1985 (21) E.L.T. 920. It is the contention of the learned Advocate that the notice dated 10th February, 1977, in fact, changes the show cause notice substantially and it should therefore be considered a fresh notice. Even if this argument is not accepted says Shri Narasimhan, then the first show cause notice is also largely barred by limitation. 3. Shri K. Narasimhan has also questioned the applicability of Rule 9, the contravention which has been alleged by the Department. It is pointed out that Rule 9 of the Central Excise Rules provides that no excisable goods shall be removed from the place where they are produc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Adhesives, it is pointed out, has a water content of 62% and no reasonable computation can take place in terms of adhesives used. 8. Finally, it is urged on behalf of the appellants that there is no justification whatsoever for the penalty imposed on the appellants as no mens rea is established. What is more, the show cause notice itself did not envisage or give notice as regards imposition of penalty. 9. Responding Shri Shishir Kumar states that the first show cause notice was complete and self-contained. He concedes that there is some change in the quantum of goods alleged to have been non-accounted for as well as the duty demanded. But this change, he says, is minor. Besides, it is claimed that there is no change in the substance of the charge. It is urged, therefore, that the ratio of the decision in the case of Radhika Vitamolt v. Collector of Central Excise, Meerut (supra) is not applicable to the present matter. 10. The learned SDR refutes the argument that Rule 9(2) is not invoka-ble in such cases because of the applicability of Chapter VIIA of the Rules. It is pointed out that Rule 9(1) of the Central Excise Rules refers to these Rules" which includes rules under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the inferences arising from the evidence adduced by the Department. 14. The learned SDR further states that there is no evidence of the paper famine claimed by the appellants to have existed, as a result of which, it is stated, that they were compelled to accept the sub-standard paper having moisture content of 15 to 20%. It is further stated that it is not shown that any such consignments of paper were returned on account of poor quality. 15. We have carefully considered the facts of the case and the submissions made before us. We find that as per the first show cause notice issued on 12th May, 1975, all that was alleged was that the appellants had not maintained a correct account of the raw materials, i.e., the kraft paper. It was alleged that taking into account the quantity of kraft paper used for manufacturing, the quantity shown to have been wasted, and the quantity of excisable goods manufactured therefrom, there was still some quantity of kraft paper totalling 4,98,544 Kgs., which was not properly accounted for. This, it was alleged, resulted in short accountal of goods and loss of duty which was computed at Rs. 59,439.10. Accordingly, appellants were required to pay th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue to rains, etc. The Assistant Collector has given an allowance of 99,490 Kgs. on this account. Apart from this quantity, the Assistant Collector has allowed an equal quantity i.e. 99,490 Kgs. to be deducted as tolerance on the ground that apart from the total waste due to vagaries of nature in open yard, storage of paper has also to be a relevant factor. It is difficult to counter act their claim in its entirety. If this total waste is put at par with the disposable one, a further quantity of 99,490 Kgs., say one lakh kilograms may have to be given as tolerance. (f) There were losses sustained during the process of manufacture due to poor quality of paper received, etc. (g) The Assistant Collector has computed that a total quantity of 23,45,352 Kgs. kraft paper was utilised in the manufacture of corrugated board and for this purpose, a total quantity of 5,18,449 Kgs. of adhesives was used. After this the Assistant Collector observes in a normal process of manufacture 5,18,449 Kgs. of paper could be rightly held as haying been wasted in this process . After giving a deduction on this account, the Assistant Collector came to a conclusion that 23,45,352 Kgs. of corrugated boa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le that is cited is Rule 9(2). Rule 9 reads as under :- (1) No excisable goods shall be removed from any place where they are produced, cured or manufactured or any premises appurtenant thereto, which may be specified by the Collector in this behalf, whether for consumption, export, or manufacture or any other commodity in or outside such place, until the excise duty leviable thereon has been paid at such place and in such manner as is prescribed in these rules or as the Collector may require and except on presentation of an application in the proper form and on obtaining the permission of the proper officer on the form; Provided that such goods may be deposited without payment of duty in a store-room or other place of storage approved by the Collector under rule 27 or rule 47 or in a warehouse appointed or licensed under rule 140 or may be exported under bond as provided in rule 13: Provided further that such goods may be removed without payment or on part-payment of duty leviable thereon if the Central Government, by notification in the official Gazette, allow the goods to be so removed under rule 49 : Provided also that the Collector may, if he thinks fit instead of requi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is nothing at all in the show cause notice to show as to what is the basis for the conclusion that kraft paper, if short-accounted for, was necessarily manufactured into corrugated board, and thereafter removed without payment of duty. 26. As the appellants have rightly pleaded, there is a rule under the Central Excise Rules, 1944 viz., Rule 173E which provides that any officer duly empowered by the Collector in this behalf may fix the quantum and period of time when the production in the assessee s factory was considered normal by such officer, having regard to the installed capacity of the factory, raw material utilisation, labour employed, power consumed and such other relevant factors as he may deem appropriate. The normal quantum of production during a given time determined by such officer as per this Rule shall form the norm and the assessee if so required by the said officer may be called upon to explain any shortfall in production during any time as compared to the norm. If the shortfall is not accounted for to the satisfaction of the said officer, then as per Rule 173E, he may assess the duty to the best of his judgment after giving assessee a reasonable opportunity of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies of nature, disposable waste and what is called further quantity to be given tolerance to make the total waste at par with the disposable one." 30. The Appellate Collector has hardly gone into all the grounds of appeal. He has referred to only the deductions claim as regards moisture content and so far as the rest of the arguments of the appellants are concerned, he has virtually dismissed them on the ground that the Assistant Collector had already been very liberal. 31. We are not satisfied that there is any evidence of clandestine manufacture of corrugated board and there is no evidence at all of surreptitious removal of such goods. Therefore, it is not established that there was any liability to duty in respect of such goods. 32. In view of our foregoing finding, no case at all is made for imposition of penalty. 33. The show cause notice itself virtually rests on concept of normal production for which no support is derived from the Central Excise Rules. Appellants have rightly cited in their favour the decision of the Supreme Court in the case of Oudh Sugar Mills Ltd. v. Union of India 1978 E.L.T. J172. It was held by the Supreme Court in this matter that the dem ..... 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