1. This is an appeal No. PRO/FA/4340 dated 12-8-1980 by M/s. Titaghur Paper Mills Co. against Order No. 153-B of 1980 dated 26-2-1980 passed by the Central Boards of Excise & Customs. This Order resulted from Order No. CPO/Collr./6/74 dated 28-5-1974 passed by the Collector of Central Excise, Calcutta.
2. The dispute arose when officers of the Central Excise checked the records of production of paper from April-July 1971 and found that the factory had recorded the quantity of paper manufactured in the R.G. 1 account from the "Accepted Weight" shown in the daily reports known as weighment sheets. The officers found that the weighment sheets have been prepared datewise with running serial numbers showing among other things, lotwise nominal weight and actual weight, variation between the two shown either as under weight or over weight as the case may be.
Efforts were made by the company to show in the records that the lots have been weighed completely and in cases where the variation between the nominal weight and the actual weight was less than 2 1/2% in respect of paper and 5% in respect of board, the nominal weight was accepted for Central Excise, and when the variation exceeds these limits, the actual weight was accepted for Central Excise. The accepted weight as per weighment sheet was found to agree when verified with the entries of production in the R.G. 1 for the period April-July, 1971.
The minus variations however were seen to be high when compared with the plus variations during the said period. Further verification of the challans brought to the notice of the officers that the chargeable weight was much higher than the net weight of paper shown in the gate passes and cleared on payment of duty. As a result of still further examination, the officers found that the weight in bills was entered and prepared with reference to the weight noted in the challans. The price was charged on the challan weight and the Central Excise duty was also realised according to the challan weight from the invoice but it appears that the duty paid to the Government treasury was on the basis of the gate passes weight. Representative of the company who were summoned before Central Excise Officers testified that excise gate passes and challans were prepared by two sets of clerks under the supervision of the officers of the mill. The gate passes with challans were sent to the Head Office for preparation of invoices. There was a difference between gate passes weight and challan weight. The weight in the invoice was determined on the challan weight. The chargeable weight shown in the challans was determined on the basis of scaling weight and if the scale weight was within 2 1/2% of the nominal weight the nominal weight was taken as chargeable weight, while if the scale weight was more than 2 1/2% of the nominal weight, the scale weight was taken as chargeable weight. The representative also testified that the challan weight and the gate passes weight always agree except in cases where scale weight was beyond 2 1/2% of nominal weight.
3. It was revealed to the officers during their investigations that the challans and gate passes were sent by the firm from the factory to their Head Office for preparation of invoices and that there were differences between gate passes weight and challan weight, and the weight of the invoice was determined on the challan weight.
4. As a result of all these investigations, the company was charged with having evaded duty amounting to Rs. 60,119.72 payable on 1,66,686.19 kg. of excisable paper removed by the factory during 1-3-1971 to 31-12-1971. Two other charges were levelled against the company but the Collector held that the second charge was not proved and he did not proceed further. In respect of the third charge which led to the confiscation of lands and buildings etc. the Board set it aside in appeal before it. We are left therefore only with the order regarding the payment of Rs. 60,119.72.
5. The appeal was heard on 16-2-1984 and Mr. Dassgupta, Snr. Finishing Accountant of M/s. Titaghur Paper Mills Co. Ltd., appeared. He argued that there has been no loss of duty because when the actual weight exceeds the nominal weight by more than 2 1/2% they recover duty on the basis of the actual weight from the customers and also charge them the corresponding price. But when the actual weight is less than the nominal weight by more than 2 1/2% they are still paying duty of excise to the Government on the basis of nominal weight. He mentioned that this is a standard practice and there is nothing wrong in what they have done. The practice of sale with reference to nominal weight is a long-standing one in the paper industry and even the practice of charging for paper is one which had been followed by the paper industry for a long time. A good deal of arguments were made by the learned representative of the appellants but for purposes of the matter before us, the only aspect that we need to attend to is whether there was really a loss of duty, granted the practice in the paper industry. The appellant, M/s. Titaghur Paper Mills Co.'s Counsel did not dispute the fact that it had been charging the customers on actual weights when the actual weights were higher than the nominal weight by more than 2 1/2% and they also accept the fact that the duty was charged in such cases from the customers as if it was payable on the actual weight. But the factory paid the duty to the treasury on the nominal weight. This was the lower of the two weights. [The learned counsel for Titaghur Paper Mills Co. submitted at the time of hearing that when the actual weight was lower than the nominal weight by more than 21 /2% they pay duty on the nominal weight although they charge the customers on the actual weight and recover duty accordingly. On such transactions they lose by paying more duty than they were liable for. But this matter is not before us and we have no facts or details to enable us to go into it.
We are therefore unable to discuss this now].
6. The problem, therefore, is concentrated on one question only and that is, whether there have been short levy in those cases when Titaghur sold and recovered from the customers prices for paper at weights higher than the nominal weight, recovering proportionate duty, but paid to Central Excise only duty leviable on the nominal weight.
The learned counsel for the appellants argued that there was no loss of duty because the duty has been paid to Central Excise on the basis of the nominal weight which is the basis for all transactions in the paper industry. He argued that the company had correctly accounted the paper in R.G.I and removed the consignment under gate passes. The departmental officers did not point out any discrepancy regarding the R.T.12 returns-raw materials account, nor did they question the results of stocktaking. The concerned Central Excise Officers never detected any irregularities. The problem according to the learned counsel was misconception on the part of their dealing clerks who showed the nominal weight.
7. It is not possible to understand the argument of the appellants. The weight shown in the challan is the same weight as shown in the bills and which were charged for. But the records show that the charged weight or chargeable weight that has been shown in the challan is different from the weight cleared under gate passes. The invoices supported the charges because they indicate the prices and the duty on chargeable weights shown in the challans and this is the basis for the department's calculation of the goods actually removed from the factory. The department has brought out that the company enclosed copies of gate passes in their bills to Government but do not do so in sales to private customers. The learned counsel for the appellants explains this as due to the fact that Government insists on gate passes. But we find this explanation a weak one because this does not explain how the factory gets round the fact that actual weight of Government consignment can exceed the nominal weight by more than 2 1/2%. If they did not charge the Government for the full actual weight, the question then arises why they had done so for private customers.
8. The charge of the department against the factory is proved and if we go by the records as are also admitted by the firm, because they do not deny that they have charged prices from the customers on actual weights which in several cases turn out to be more than the nominal weight and that they also recover the duty from the customers on such actual weights, but paid to the Government only duty chargeable at the lower nominal weight. There can be no two opinions that the correct assessable duty is the duty recoverable on the actual weight. The actual weight in all those cases was more than the nominal weight on which duty was paid by the factory. In fact, we are not a little surprised by the argument of the counsel for the appellants that there has been no short payment of duty as they had paid duty on the nominal weights. There transaction with the customers in several cases was on the basis of actual weight for which they charged the customers and recovered duty from them; that is the price which should form the assessable value and on which duty should be paid. We can see no other action possible except the action taken by the Collector. The Board has already given some relief in respect of the confiscation of the plant, machinery etc. We do not consider that any further relief is deserved.
The imposition of the penalty also is fully deserved as we are satisfied that M/s. Titaghur Paper Mills Co., did all this in full knowledge that they were causing loss of duty.