9911796707
TMI Blog1985 (3) TMI 289X X X X Extracts X X X X X X X X Extracts X X X X ..... e and Pigments Ltd., respondents herein, and verified the stock and accounts. They noticed that 19 different items, details of which are set out in the order of the Deputy Collector (Gold) dated 12-5-1983 in C. No. V/15AA/15/1/82 Cx. Adj. II, were kept in the working hall of the factory in a fully packed condition and ready for despatch and that they had not been accounted for in the statutory R.G.1 account. Examination of some of the packages and cartons showed that some of the goods had been packed in 1/82, 4/82, 6/82, 8/82 and 12/82; and in some cases packing slips were found with dates of packing as 4-9-1982, 24-11-1982 and 9-10-1982. The goods were seized for violation of the provisions of the Central Excise Rules as they were deemed to be unaccounted and considered to be meant for clandestine removal. Statements were recorded from the factory Manager who indicated that the factory was not working due to Electricity Board regulations and the goods which were seized by the officers were not accounted for in the R.G.1 due to clerical mistake, though they were manufactured and fully packed prior to 28-11-1982 and were kept ready for despatch. Show cause notice was issued for cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ide, was 8/82. 5. The SDR pointed out that 665 bags which were entered in R.G. 1 account were found outside the store-room. The 19 groups of packages under confiscation were not entered in R.G. 1. account and were in the working hall. Though it was claimed that the factory was not working due to power regulations between 28-11-1982 and 2-12-1982, packing slips of December 1982 were found in one of the cartons. In respect of sl. no. 6 of the statement of goods referred to in the show cause notice, out of 736 cartons, 720 were with mark 0 ; the claim of the respondents is that these goods were required to be reprocessed due to a complaint from Hindustan Marketing House, Calcutta, to whom similar goods had been sent earlier and they were kept for reprocessing; therefore, they are not in a fully manufactured condition. He adopted the arguments of the Deputy Collector as set out in para 31 of her order in respect of these goods. 6. Referring to the fact that the packages had not been numbered, the SDR urged that according to Rule 51(i)(b) marking of serial number has not been done in the past nor is it part of process of manufacture. Hence for purposes of Rule 53, non-marking of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of Behari Lal Omar Rolling Mills v. Union of India and others, reported in 1983 E.L.T. 766 (All.) (paragraphs 7 and 11) according to which an adverse inference can be drawn from the circumstances of a case regarding intent to evade, if the purpose of the rule is to prevent evasion; in the present case it is so. The plea made on behalf of the respondents that R.G.1 point has not been notified is not relevant. There is no legal obligation under the Rules to notify R.G.I point for each and every product. When it is so notified, it is to be followed. But non-notification does not imply that and point can be taken as the R.G.1 point. Hence the observation of the Collector (Appeals) that Department had neither notified the R.G.1 point, nor perhaps was able to do so, is unwarranted. The SDR also questioned the correctness of para 5 of the order of the Collector (Appeals) wherein he has observed that the respondents had not been directed by the Department earlier to enter production at a stage prior to packing or to at a stage immediately after primary packing, or even at the stage when secondary packing is done, viz. when soaps and detergent powders are put in cartons and cartons are b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertain entries therein with particular reference to the production capacity of the factory (which works out to 350 cases per day-working on two shifts). It will be seen from an entry relating to 21-2-1980 that the opening balance is shown as 491 and the quantity produced as 600. This should be an indirect evidence that col. 3 has been indicated as whatever was available for release on any particular day rather than the quantity manufactured on any particular day. He urged that the statement given by the factory Manager could not be considered as voluntary as the mahazar was completed after 11 P.M.; there was a threat that the goods might be removed from out of the factory; they would not stand the strain of additional transport. Hence when it was thought that if a statement was given, the goods might be left in the factory, the factory Manager gave the statement. There was thus an element of inducement and therefore the statement cannot be relied upon. He referred to a letter given by the consultant of the respondents on 3-12-1982 wherein it has been stated that the seized goods were not in a fully manufactured or packed condition. It was so because there was shut down of electrici ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .L.T. 159 wherein the Supreme Court has held that technical or venial breach need not be visited with a penalty. Then he referred to the case of Southern Steel Ltd., Hyderabad v. Union of India and others - 1979 E.L.T. 402-wherein the Andhra Pradesh High Court has held that the practice existing for years and accepted by the Department should not be considered as a violation for purposes of Rule 173Q (d). 12. The advocate for the respondents also relied on the judgment of the Madras High Court in the case of B. Lakshmichand v. Government of India - 1983 E.L.T. 322 (Mad.)-in respect of Sec. 112 of the Customs Act, 1962 and submitted that where there is no reference to sub-section when different considerations apply to what constitute an offence under different sub-sections and absence of indication of the specific sub-section would vitiate a show cause notice. Hence the order of the Deputy Collector based on a show cause notice which refers to Rule 173Q without reference to (a), (b), (c) and (d) would be bad in law. 13. In reply, the SDR submitted that the claim of the respondents is that the factory did not work in December 1982 at all and there was a complete shut down from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... af account and the absence of acceptable evidence as to how it was disposed of. In the present case also, certain explanations were offered by the respondents which were found to be not correct. On analogy, it cannot be sail that the burden of proof has not been discharged by the Department. 15. As a lot of discussions revolved around the 736 packages which were supposed to be remade for the use of the Calcutta party, we wished to see the correspondence with that party in the matter. Copies of the same were submitted on the last day of hearing. By a letter dated 12th July, 1982, Hindustan Marketing House, Calcutta, had written to the respondents as to the despatch plan for the next three consignments of Marc 1 detergent powder. Regarding first consignment sent round about 2nd June, 1982, various factors had been indicated therein, one of which refers to the complaint of less foaming which would also be checked and from the third consignment we shall not face such type of problems . In a telegram dated 12-8-1982 the respondents have informed the Calcutta party : Arrange immediate remittance for third and fourth consignments Marc also forward road permit stop Matter urgent. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs 1, 2, 3, 7(1), 9 and 13 of the schedule in para 1 of the order of the Deputy Collector are also in a finished stage and our observations in para 17 would apply in their cases as well. 19. Regarding the plea of the learned counsel for the respondents that in terms of Packing Commodities Control Order labels of one month can be used for the preceding month, we note that no particular evidence has been brought on record as to the quantity of labels available during the month of November 1982 and the production during that month to draw an inference that labels of December 1982 have in fact been used for production of November 1982. In the absence of such evidence, the marking regarding goods having been manufactured in December 1982 has to be taken at its face value. If so, the plea of complete shut down from 29-11-1982 to 2-12-1982 has to be accepted with a pinch of salt-it is particularly so when one considers that there are entries in the RG I register for 29-11, 30-11 and 1-12-1982. Thus, in respect of the goods marked as having been produced during this period and not kept in the store-room, the position would be similar to what we have observed in respect of the packages m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay be prescribed by the Collector with details to be entered as set out in parts (a) to (g) of sub-clause (i) of that rule. Part (c) deals with quantity manufactured, (d) quantity deposited in the store-room, and (e) and (f) deal with quantity removed from the store-room. The two rules thus cover the same area of application insofar as accounts regarding manufacture, storage and delivery are concerned. Rule 173A provides that only in case of conflict between Rules 173G and 53, the provisions of Rule 173G will prevail. As the rules cover the same area and no conflict arises between the two, the question of rule 173G(4) having over-riding application over rule 53 does not arise. Hence invocation of both rules 53 and 173G(4) would not be an infirmity in the order of the Deputy Collector, contrary to the finding of the Collector (Appeals). Non-conformity with rules 53 and 173G(4) would attract the provisions of rule 173Q(b). 21. The relevant portions of Rule 226 are extracted below: Rule 226. How entry books, stock account and warehouse registers should be maintained. - Where any person is required by these Rules to maintain an entry book, stock account, or warehouse register in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... turer is called upon to account for any goods manufactured, he has to do so in the manner prescribed and not in any manner that he chooses. When accounting is not done in the manner prescribed, it is not accounting according to the rules. In this view of the matter, we consider that in the present instance provisions of Rule 173Q(b) are attracted. 24. We note in the show cause notice the respondents were put on notice for contravention of Rule 226 in asmuchas they failed to enter excisable detergent items in the R.G. 1 register. Rule 226 deals with the correct maintenance of books (in this case R.G.1-E.B.4 register) and making true entries therein. It also provides that if in respect of any goods such entries are not made or the register not duly written up, the relevant goods would be liable to confiscation. Though both in the show cause notice issued by the Department and in the order-in-original passed by the Deputy Collector, Rule 226 has been invoked along with Rule 173Q for purposes of holding that concerned goods are liable to confiscation, we see no conflict between the provisions of Rule 226 and of any other rule in Chapter VIIA such as Rule 173G(4) and/or 173Q(b), so a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ential ingredient in relation to an offence under the Sea Customs Act. 26. If we now turn to the structure of Rule 173Q(1) of the Central Excise Rules, we note that it consists of four sub-clauses (a), (b), (c) and (d), infringement of any one of which will render relevant goods liable to confiscation and invite penalties on the manufacturer, licensee or owner of a warehouse. Sub-clause (a) deals with the liability of a manufacturer if he removes any excisable goods in contravention of the provisions of the rules. The manufacturer will always be in the knowledge of goods produced and if removal of such excisable goods is not in accordance with the rules, liability is attracted. Sub-clause (b) refers to accounting. Here too, a manufacturer is aware of the goods manufactured by him and has to necessarily account for the same in the prescribed manner. Sub-clause (c) refers to engaging in the manufacture without a licence when one is needed. In all these cases certain amount of knowledge is inherent in the commission or omission simpliciter. It is hardly necessary to import mens rea. Per contra, sub-clause (d) refers to contravention of any of the provisions of these rules with inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng would not, in our view, substantiate a conclusion that all this was done with intent to evade payment of duty so as to attract the provisions of Rule 173Q(1)(d). We therefore do not agree with the finding of the Deputy Collector insofar as penalty under Rule 173Q(1)(d) is concerned. 29. In passing we would refer to the plea of the learned counsel for the respondents that the statement of Sampathkumar given on the date of seizure was under an inducement. Considering that the goods have been already packed and in a number of instances strapped with plastic straps, the plea that the fear of handling of the goods by way of removal from the place of seizure to the office of the Assistant Collector would damage them, and if a statement was made the goods might not be removed (though in fact they were finally removed) the statement was given does not appeal to us. If goods are of such a delicate nature, surely the Department would take suitable steps for removing them in their own interest, in the sense that the goods have to be preserved intact and without damage, both for purposes of establishing the alleged offence and to preserve the value of the goods, should they finally be co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stored in the bonded store-room under Rule 54 (E.B.4) will also show that account is by number of packages, quantity, etc. and is not necessarily dependent on their being numbered with batch number, serial number, etc. Hence the plea that without numbering, the goods were not in a fully packed condition and therefore were not ready to be deposited in the store-room is not an acceptable one. 32. Another point was made that the practice of entering details of the packages in the R.G.1-E.B. 4 register only at the time they were being delivered out of the factory had been in vogue for some time and has gone unchallenged; it was therefore claimed on behalf of the respondents that no adverse inference should be drawn in the present instance or goods subjected to penal action. There is nothing similar to the law of estoppel in a taxing statute. If a manufacturer is expected to conform to a certain prescribed procedure and is found to be not doing so on any particular occasion, the fact that he has been observing the wrong procedure even in the past cannot be a justification. We note that according to Trade Notice No. 72/66 issued by the Collector of Central Excise, Madras, closing bala ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
