1. Appeal No. 1/75 arises out of the Order-in-Original bearing No.V-15A (15)2/73, dt. 24.10.74 passed by the Collector of Central Excise, Bombay, by which he passed the following order: (1) confiscation of 158 rolls of PVC films but gave an option to redeem the goods on payment of a fine of Rs. 5 thousand in lieu of confiscation.
(2) directed that duty at the appropriate rate be recovered from the firm in respect of the following goods: (i) Laminated P.V.C. films 200 metres (ii) Flexible P.V.C. films 50,063 metres, (iii) Flexible P.V.C. films 582 kg.
(3) imposed on the firm a penalty of Rs. 50,000 under Rule 173Q and Rs. 2,000 under Rule 226 of the Central Excise Rules.
2. Appeal No. 3/75 arises out of the Order-in-Original No. V/15-15 (2A)/73, dt. 2.7.75 passed by the Collector of Central Excise, Bombay, by which he directed recovery of duty on certain quantities of P.V.C, films and also imposed a penalty of Rs. 50,000 under Rule 173Q and a further penalty of Rs. 1,000 under Rule 52A of the Central Excise Rules on the firm.
3. The above two appeals preferred against the above-said two orders of the Collector before the Central Board of Excise & Customs statutorily stood transferred to the Tribunal under Section 35-P(1) of the Central Excises and Salt Act, 1944.
4. As the appellants are sister concerns, the points of law involved in both the appeals being identical and at the request of the learned Advocate, Shri M. Ganeshan in both the appeals, and the learned Departmental Representative, Shri N.K. Pattekar, the two appeals were clubbed together and were heard together and hence this common order.
5. The appellants in Appeal No. 1/75 (to be referred to as 'Mills' hereinafter) were issued with a show cause notice dt. 4.7.73 alleging that (i) on 10.1.73 they removed 169 bundles containing 342 rolls admeasuring 9807.00 L.Mts. Flexible PVC films [Tariff Item No. 15A(2)] valued at Rs. 50,484 alongwith 8 bundles containing 29 rolls admeasuring 356 L.Mts. and 5 bundles containing 19 rolls weighing 250 kgs. of flexible PVC films both valued at Rs. 3,335 under invalid Central Excise gate pass Nos. 35 and 36 both dated 10.1.73 without payment of Central Excise duty and without following the procedure required to be followed under Rule 52A read with Rule 173G(2) of the said Rules.
(ii) the excisable goods covered under gate pass Nos. 35 and 36 both dated 10.1.73, 110 rolls admeasuring 4540 L.Mts. of flexible PVC films and 29 rolls ad measuring 356 L.Mts. and 19 rolls weighing 250 kgs. of flexible PVC films were not accounted in the Central Excise Records as required under Rules 53, 226 read with Rule 173G(4).
(iii) they did not determine the duty liability on 200 metres of Laminated PVC films gold of 0.55/0.60 mmx 48" valued at Rs. 1,452 as required under Rule 173F and removed the said goods from the factory without payment of Central Excise duty by debit to their current account and without following the gate pass procedure to be followed under Rules 173G(1), 52A read with Rule 173G(2).
(iv) they did not determine the duty liability on 1495 Rolls admeasuring 50063 L.Mts. of flexible PVC films valued at Rs. 2,22,960.84 and removed the same goods without payment of Central Excise duty by debit to their current account and without following the gate pass procedure to be followed under Rules 173F, 173G(i), 52A read with 173G(2) and they have not accounted the same goods during the period from 21.12.74 to 6.7.75 in the Central Excise Records regarding production, storage and removal from the factory as required under Rules 53, 226 read with Rule 173G(4).
(v) they also did not determine the duty liability on 582 kgs. of flexible PVC films valued at Rs. 1,782.50 and removed the same goods without payment of Central Excise duty during the period from 4.2.72 to 27.3.72 and they have not accounted the same in the Central Excise Records regarding, storage, and removal from the factory as required by the Rules.
The Mills in their reply dt. 18.3.74 contended inter alia (1) 169 bundles containing 342 rolls were cleared under valid Gate Passes bearing Nos. 35 and 36 both dated 10.1.73 and the duty thereon has been duly paid.
(2)(i) 29 rolls admeasuring 356 metres and 19 rolls admeasuring 150 kgs. comprised of cut pieces and they were inadvertently loaded into the truck due to negligence on the part of the despatch clerk who was supervising the loading operations; (ii) employees handling excise work were housed in the factory of Messrs Amartara Industries. Under the procedure followed by them regarding the records of production in Excise books, the production report of one particular day was prepared in the evening the same day and sent to the Excise department next day morning when it was entered in the excise record. The 110 rolls mentioned in the notice which were manufactured on 10.1.73 would have been entered in the excise record on 11.1.73. The goods in question were however urgently required by their customers and hence had to be despatched immediately after production, before they could be entered in the excise books. The omission to be entered in the excise books is an error of a technical nature and they may be pardoned.
(3) The 200 metres of Laminated PVC Film were not cleared at all.
The apparent shortage is attributable to duplication of production record.
(4) The list as per Appendix (A) prepared by the Central Excise Officers is based on personal memo books of the despatch clerk. Such books are not official company documents and cannot be relied upon.
(5) As regards 582 kgs. of cut pieces of Flexible PVC Film valued at Rs. 1,782.50, they are unable to connect the particulars mentioned in the Appendix (B) . to the show cause notice. Such cut piece samples are used for free distribution to the customers in order to promote the sales of the products and it is a normal trade practice.
6. The appellants in Appeal No. 3/75 (to be hereinafter referred to as 'Plastics Ltd.') were also issued with a show cause notice dt. 4.7.73 alleging that - (i) they did not determine the duty liability on 14,886.00 kgs. of rigid P.V.C. film Tariff Item No. 15A(2) of the variety of clear transparent valued at Rs. 91,400.04 and 6532.00 kgs. of Rigid P.V.C. film of the variety of all coloured valued at Rs. 42,458 and removed the same goods during the period from 19.6.72 to 20.11.72 without payment of Central Excise duty, by debit to their current account and without following the gate pass procedure to be followed under Rules 173F, 173G(1), 52A read with Rule 173G(2) and they have not accounted the same goods in the Central Excise records regarding production storage and removal from the factory as required under Rules 53, 226 read with Rule 173G(4).
(ii) they have also not determined the duty liability on 262 rolls admeasuring 26,200.00 L.Mts. of flexible P.V.C. film valued at Rs. 42,983 and removed the same goods on 27-5-71 without payment of Central Excise duty by debit to their account current and without following the gate pass procedure to be followed under Rules, 173F, 173G(1), 52A read with Rule 173G(2) and they have not accounted the same goods in the Central Excise records regarding production, storage and removal from the factory as required under Rules 53, 226 read with Rule 173G(4). The said M/s. Amartara Plastics Pvt. Ltd., situated at Saki Vihar Road, Powai, Bombay-72 AS, owner of the said offending goods are hereby required to show cause to the Collector of Central Excise, Bombay, 4th Floor, Central Excise Building, Maharashi Karve Road, Bombay-20 why (a) a penalty should not be imposed upon them under Rule 173Q of the Central Excise Rules, 1944, (b) duty on aforesaid goods should not be demanded and recovered at the appropriate rate under Rule 173C of the said Rules.
In their reply to the show cause notice the 'Plastics Ltd.' contended inter alia that the action initiated against them after the expiry of 6 months from the date of commission of the alleged offence is not maintainable by reasons of the provisions of Section 40(2) of the Central Excises and Salt Act, 1944 (to be hereinafter referred to as 'the Act'). They denied having produced and cleared without payment of duty 14,886.60 kgs. of Rigid PVC films and 6532.30 kgs. of all coloured PVC films between 19.6.72 to 20.11.72. They further contended that the statement at page 161 of the file was prepared by the Excise clerk Mr.
P.G. Dharampal and at that time he was the main person instigating agitation among every member which resulted in subsequent strike and lock-outs in the company. They have reason to believe that the said Mr.
Dharampal planted the above fictitious statement only to create problems for the management. It is then contended that on receiving the statement from Dharampal, Shri S.S. Patil who knew nothing about what goods were being produced and/or cleared until the excise clerk brought him the statement supported by production slips must have addressed a note to the Managing Director. There was nothing to indicate that the goods were surreptitiously removed. It was only a surmise of the department based entirely on the notes that no other supporting evidence either regarding production or regarding removal.
7. They further contended that on 27.5.71 they had cleared 262 Rolls of flexible PVC films under gate pass No. 475, dated 25.7.71 and had intended production of identical quantity by the end of May 1971 and, therefore, contacted M/s. New Safe Carriers (E & W) Pvt. Ltd. on 27.5.71 for transport of goods to Delhi. Accordingly, they booked the order dated 27.5.71 and thereafter cleared 262 Rolls of PVC films only on 31.5.71. They maintained that there had been no clearance of this consignment on 27.5.71.
8. The learned Collector of Central Excise, Bombay after affording a personal hearing to the appellants in both the cases rejected their contention and passed the orders referred to in the beginning of this order.
9. During the hearing Shri Ganeshan, the learned Advocate for the appellants in the two appeals contended with considerable skill that according to the allegations contained in the show cause notice dated 4.7.73 issued to 'the Mills', it was alleged that they committed the alleged offences between 21.12.71 and July 1972. In the show cause notice dated 4.7.73 issued to Plastics Ltd., the allegation was that they committed the alleged offences from 19.6.72 to 20.11.72 and on 27.5.71 Shri Ganeshan contended that under Section 40(2) of 'the Act' as it stood prior to its amendment in 1973, no action could be initiated against the appellants for anything done or ordered to be done after the expiration of six months from the accrual of cause of action. He further submitted that as per the allegations contained in the show cause notice issued to the appellants, the commission of the alleged offences have taken place in the year 1971 and before August 1972, and therefore, the show cause notice issued on 4.7.73 is barred by limitation and is without jurisdiction. All further proceedings in pursuance of such a show cause notice are also invalid in law, and as such the orders passed by the learned Collector which are the subject-matter of the two appeals may be set aside. In support of his contention that no proceedings can be initiated after the expiration of 6 months from the date of accrual of cause of action, Shri Ganeshan relied on a decision of the Supreme Court, in 'Public Prosecutor, Madras v. R. Rajit and Anr.', 1978 ELT (J 410) and also on two decisions, one reported in 1978 ELT page 556 'Hyderabad Allwyn Metal Works Ltd v. Collector of Central Excise, Hyderabad', and the other reported in 1981 ECR page 86-D (Madras): 1984 (16) ELT 82 (Mad)', 'A.P.Armugaswamy v. Deputy Collector of Central Excise'. The decisions relied on by Shri Ganeshan do support his contention that initiation of proceedings after the expiration of six months from the date of accrual of cause of action is barred under Section 40(2) of the Act as it stood prior to its amendment in May 1973.
10. Shri Krishan Kumar assisted by Shri N.K. Pattekar, Departmental Representative did not dispute the above legal position. He, however, contended that the show cause notice in both the cases were issued well within the period of 6 months from the date of knowledge of the commission of offences by the appellants, and therefore, the show cause notices are valid in law.
11. Having regard to the rival contentions, it is necessary for us to ascertain as to when exactly cause of action accrued in each case. Was it on the date of commission of the offence as contended by Shri Ganeshan or was it from the date of knowledge of the Central Excise Officer of the commission of the offence. The three decisions, above referred, in our view do furnish a clear answer to the above question.
12. In the Supreme Court decision referred to above a complaint was received in the Court of the Sub-Divisional Magistrate on 18.5.65. The inspection of the factory by the Central Excise staff was on 25.7.64.
The Sub-Divisional Magistrate, therefore held that computing the period of six months from the date of inspection, the last date within which the complaint should have been laid would be 25.1.65. In the above view of the matter the learned Sub-Divisional Magistrate acquitted the accused holding that the prosecution was barred by limitation under Section 40(2). The High Court as well as the Supreme Court have upheld the view taken by the learned Magistrate.
13. In Hyderabad Allwyn Metal Works Ltd., there was a stock taking by the Officers of the Central Excise department in the petitioner's premises from 3.12.69 to 23.12.69, as a result of which they found that the Petitioner had contravened Rules 9(1) and 226 of the Central Excise Rules. A show cause notice was issued on 29.6.72. Before the Andhra Pradesh High Court it was contended that issuance of the show cause notice subsequent to the expiration of the period fixed under Sub-section (2) of Section 40 of the Act is without jurisdiction and barred under Sub-section (2) of Section 40 of the Act. This contention was upheld by the High Court. In A.P. Armugaswamy's case a show cause notice dated 14.3.73 was issued in pursuance to the surprise check of accounts held on 21.7.72. The High Court of Madras accepted the contention that the proceedings initiated against the petitioner therein was barred under Section 40(2) of the Act. In the course of this judgment His Lordship Justice Padmanabhan referred to the observation made by Justice Ramaprasada Rao, in Loganathan v. Secretary to the Government of India (1974 L.W. 32). The relevant portion of the observation as culled out by His Lordship reads.: The question of bar of limitation under Section 40(2) of the Act was raised before the learned Judge and the learned Judge accepted the plea. In so doing the learned Judge observed as follows: "The text of this provision is clear that no statutory functionary under the Act can take any proceeding or institute a suit or prosecute for an alleged offence any person who failed to do anything which he was ordained under the Act to do if the act complained of is beyond the period of six months from the date when action is initiated. This limit of time is positive and inescapable.
After the expiry of this period of time, even though there is an apparent cause of action as is seen from the record or from the materials available, such a cause of action cannot be furthered by any overt action such as a suit, prosecution or other legal proceeding under the Act. The words 'anything done or ordered to be done under this Act' is all embracing and would include any statutory duty which a person has to perform under the Act. One such statutory duty which a licensee under the Act has to do is to pay the excise duty over the stock removed from the warehouse. If he unauthorisedly removes the same without subjecting such goods to excise duty and without accounting for such duty in any manner and in the result evades such duty, then the cause of action to bring to book such action of the delinquent licensee would arise on the date of that act or on the date when a complaint is made about such act.
In such cases of evasion of duty it would be rather difficult of find out the date of the act. But when the warehouse is inspected and if the removal is detected then at that point of time the department secures knowledge of the act because they begin to complain of that act and as soon as they secure such knowledge and they are in a position to complain of such an act done by the licensee, then the limit of time begins to run and the cause of action has accrued on that date and automatically it would expire within a period of six months from such accrual of causes of actions." 14. From the reading of the decisions cited above, it is clear that the date of accrual of cause of action need not necessarily be the date of commission of the alleged offence. In a given case, it is permissible to take the date of knowledge of the Central Excise Officer of the commission of the offence as the starting point for the purpose of computation of the period of limitation.
15. The appellants by clandestine removal have successfully concealed or kept out of the knowledge of the Central Excise Officers of such removal of excisable goods. In the said circumstances the period of limitation in our view should not begin to run unless and until the Central Excise Officers have either discovered the clandestine removal or with reasonable diligence could have discovered it.
16. In both these appeals, it was only in the month of January 1973 namely, on 10.1.73 and 11.1.73 the Central Excise Officers have for the first time came to know the clandestine removal of goods and the commission of other offences by the appellants. Therefore, the show cause notice issued on 4.7.73 which was within the period of six months is not barred under Section 40(2) of the Act and all further proceedings in pursuance of such a show cause notice are also valid, and therefore, we reject the contention of Shri Ganeshan that the orders passed by the learned Collector are liable to be set aside, because the initiation of the proceedings by means of show cause notice was much after the actual date of the commission of the offences.
17. Coming to the merits of the case in Appeal No. 1/75 as has been stated earlier, there were five distinct allegations against 'the Mills'. The learned Collector has considered each of the allegations separately and had given cogent and convincing reasons for not accepting the contention of the appellants. The annexure to the show cause notice discloses that on 11.1.73 officers of the Central Excise (Prev.) Divn. Headquarters, Bombay, had kept close watch in the vicinity of Mills and about 15.30 hrs. they noticed a truck bearing No.DLL 9041 came out of the said factory and the same was intercepted. It was found to contain consignment of flexible PVC films. Shri Kannan who was accompanying the said truck produced a Central Excise gate pass No.35 dated 10.1.73 and a proforma invoice. The invoice did not contain any Sr. No. and date of issue. The Officers further found 8 bundles containing 29 rolls and 5 bundles containing 19 rolls were not covered by any gate pass. Their visit to the godown and verification of the stock with reference to the Central Excise records also disclosed that 200 metres of flexible PVC laminated materials were not found in the bonded store room. Verification of R.G. 1 register also disclosed that the goods covered by gate passes bearing Nos. 35 and 36 were not accounted for. The appellants offered their explanation by stating that their excise work was housed in a factory of M/s. Amartara Industries and as per the procedure followed by them, the relevant entries in the excise documents are made in the evening or on the next day morning, and as such entries could not be made in R.G. 1 register of the goods covered by gate passes No. 35 and 36. Though, one may not take serious objection as to the procedure followed by the appellants having regard to the practical difficulty resulting from the distance one fails to understand why the appellants should have removed the goods before statutory entries are made. In reply to the show cause notice the appellants contended that the goods in question were urgently required by their customers and hence had to be despatched immediately. This explanation has not been rightly accepted by the learned Collector." The nature of urgency has not been spelt out. Excepting the bare statement of the appellants by way of reply, no other matter has been placed before the learned Collector to establish the urgency. That apart, according to the allegations contained in the show cause notice, the invoice was not serially numbered and no explanation given for this grave omission. The contention of Shri Ganeshan that the appellants have only committed a technical breach in not making necessary entries in R.G. 1 register cannot be accepted. It is not an unknown practice to clear goods more than once on the strength of a same gate pass. In any event the possibility of making use of the single gate pass for clearing goods more than once cannot be altogether ruled out. Neither production of a gate pass nor making a debit entry in the PLA account can absolve the appellants' of the breach of statutory duty of making entries in R.G. 1 register. R.G. 1 register is a basic document. The actual removal of goods shall have to be made after necessary entries are made in R.G. 1 register. As has been rightly observed by the learned Collector if this was only an isolated act, the lapse could have been condoned. There were serious other allegations against the appellants and on the basis of the facts before him, the learned Collector have found them to be true. The invoice produced by Shri Kannan who was accompanying the truck which was intercepted by the Central Excise Officer did not bear the date of issue. It had no serial number also. In the said circumstances we reject the contention of Shri Ganeshan that there was only a technical breach which did not call for confiscation of the goods.
18. Shri Ganeshan for the appellants next contended that the burden of establishing the allegations or charges made against the appellants rests solely on the department and that the department has miserably failed to discharge that burden. According to Shri Ganeshan there was no sufficient evidence to justify the conclusions reached by the learned Collector that the charge or the allegations have been established.
19. As the department is not relying on any statutory presumption, the burden certainly rest on the department to establish by satisfactory evidence the allegations or the charges levelled against the appellants. But then the contention of Shri Ganeshan which has the implication that the department is required to establish the guilt beyond reasonable doubt cannot be accepted as correct. There is a considerable difference between adjudication proceedings and prosecution. Strict rules of evidence are not applicable to adjudication proceedings. The nature and extent of proof required in an adjudication proceedings is different from the nature and extent of proof required in a criminal prosecution. In the case of criminal prosecution the burden of establishing the guilt of the accused is always on the prosecutor and that burden has to be discharged beyond reasonable doubt. But in an adjudication proceedings the initial burden of establishing the charges lies on the department. When once this initial burden is discharged by the department by adducing satisfactory evidence then the onus shifts to the delinquent to rebut the evidence against him. Further, in an adjudication proceeding the department is not required to establish the guilt beyond reasonable doubt. The pre-ponderance of probability is the test to be applied. In the instant case the department was able to establish by satisfactory evidence that the appellants have not complied with the requirements of law. The department has established that the appellants have failed to enter the removal in R.G. 1 register. The appellants did not dispute that necessary entries have not been made in R.G. 1 register before removal of the goods. They offered certain explanation as to why they could not make necessary entries in R.G. 1 register before removal. The admitted non-compliance of the statutory obligations shifts the burden to the appellants to explain the non-compliance to the satisfaction of the adjudicating authority. The learned Collector considered the explanation offered by the appellants. He could not accept the explanation. We have again examined the explanation in some detail and we also are not satisfied with the explanation. In the circumstances we are unable to agree with the contention of Shri Ganeshan that the department had not placed on record sufficient evidence to establish the allegations or charges made against the appellants or that the department had failed to discharge the burden of proof rested on it. In the said circumstances and for the reasons stated by us, we see no reason to interfere with the order of confiscation of 158 rolls of films passed by the learned Collector.
20. As regards the goods which were not covered by the gate passes, the explanation of the appellants was that those were loaded into the truck inadvertently and that it occurred due to negligence on the part of the despatch clerk who was supervising the loading operations. The learned Collector has refused to believe this explanation. No fresh material has been placed before us to accept the said explanation. Refusal on the part of the learned Collector cannot be considered in the circumstances of the case as either arbitrary or unjust. It is highly improbable and unbelievable that by inadvertence or by negligence, certain goods would be loaded into a lorry without a proper gate pass.
It is not the case of the appellants that the person in charge of loading is altogether new to the job and is ignorant of the procedural requirement.
21. The learned Collector in our view is also justified in not believing the explanation offered with regard to the clearance of 200 metres of laminated PVC films. From the material placed on record it is seen that there was Production Engineer in charge of production. When there was such a highly qualified person in charge of production, the explanation of the appellants that inadvertently one more production report was prepared on 22.12.72, though in fact there was no production of 200 metres of laminated PVC on that day cannot be accepted.
22. Shri Ganeshan urged that having regard to the gravity of offence, the imposition of penalty of Rs. 50,000 under Rule 173Q and Rs. 2,000 under Rule 226 is highly excessive and unjust. We are not impressed with the argument. The detection of the unauthorized removal without payment of duty was possible only because of the interception of the lorry by the Central Excise Officers. Considering the quantity and the value of the goods and taking into consideration the quantum of penalty that could be statutorily imposed, we see no reason to interfere with that part of the order of the learned Collector.
23. In the result and for the reasons stated above, we see no merit in this appeal and accordingly we dismiss the same.
24. Coming to the merits of the case in Appeal No. 3/75 Shri Ganeshan, the learned counsel for the appellants strenuously contended that the allegations against the appellants of the clandestine removal of 14886.60 kgs. of Rigid PVC Films and another 6532 kgs. of Rigid PVC Films are baseless and not supported by satisfactory evidence. The department according to Shri Ganeshan relied on the statements made by the disgruntled excise clerk who was bent upon creating problems to the management and even had instigated strike which resulted in the lock out in the Company. The other document relied upon by the department was a letter purported to have been addressed to the Managing Director bearing the initial of the accountant but then the accountant Shri S.S.Patil in his statement had pleaded ignorance as to the contents. Shri Ganeshan further submitted that even Dharampal in his statement could not vouchsafe as to the actual production, Shri Ganeshan urged that the department had failed to take into consideration that productions that took place between 13.12.1971 and 20.4.1972 were not only entered in the statutory register but were even supported by production slips. If really there had been production of the above quantity during the period from 19.6.72 to 20.11.72 there would have been production slips to evidence the production and the absence of production slip is a clear indication that the said quantity of films not produced. It was further contended by Shri Ganeshan that the department solely relied on the letter dated 30.11.72 which did not even bear the signature of the Managing Director Mrs. Swarup. The department did not even question Mrs. Swarup. Further, the supply was alleged to have been made to M/s.
Ajay Industrial Packaging Pvt. Ltd. but then the Central Excise Officers have not recorded statements of any of the persons connected with Ajay Industrial Packaging Pvt. Ltd. He therefore, submitted that the learned Collector was unjustified in holding that the appellants clandestinely removed the above-said two quantities of Rigid PVC Films.
25. Shri Krishan Kumar for the department however, contended that the allegations against the appellants are based on the documentary evidence found in the records of the appellants' firm. They were not concocted by the department. The contention of the learned Advocate that Shri Dharampal was a Union leader and he intended to create problems for the firm and that he created fictitious documents have not been substantiated. Shri Krishan Kumar further urged that the letter dated 30.11.72 was addressed to the Managing Director and it bears the initial of the accountant Mr. Patil. This letter coupled with the statements established beyond doubt of the production as well as clandestine removal. In the said circumstances, according to Shri Krishan Kumar the learned Collector was justified in holding that the said charge has been established.
26. We have carefully considered the submissions made on both sides. As has been rightly contended by Shri Krishan Kumar the appellants have not been able to satisfy the learned Collector that the Excise clerk Mr. Dharampal intended to create problems to the management or that he created fictitious documents. To us the allegations made against Shri Dharampal by the management were intended to cover up their own misdeeds. There is no proof whatsoever that Shri Dharampal deliberately planted and kept production figures in the file during the relevant dates. The appellants were supplied with the copies of the statement of Shri Dharampal. This statement formed part of the show cause notice.
The appellants were aware as to the statement of Shri Dharmapal and other evidence on which the department proposes to rely in the enquiry.
The appellants did not choose to cross-examine Shri Dharmapal nor did they adduce any independent evidence to disprove the evidence relied upon by the department. The Accountant, against whom nothing has been alleged also sought instructions from the Managing Director by his letter dated 30.11.72 as to the preparation of the gate passes and making necessary debit entry in the PL Account. The contention of Shri Ganeshan that the Accountant in his statement had stated that he put his initial as a matter of routine and had not properly verified the correctness of the statement and therefore, no reliance should be placed on the said letter cannot be accepted. An Accountant is an important official in any set up. More so in an industrial set up. One cannot expect an accountant to sign papers in a routine way, particularly, when the subject-matter relates to the making of certain debit entries in the PL Account Maintenance of accounts is one of the functions of the Accountant. In the said circumstances the explanation offered by Shri S.S. Patil that he signed in a routine way without verifying the production cannot be accepted. The department could have confronted the Managing Director with the letter and it could have even examined some one connected with M/s. Ajay Industrial Packaging Pvt.
Ltd. but the omission on the part of the department in these regard, in our opinion, has not resulted in the mis-carriage of justice. The materials brought on record by the department were sufficient to discharge the burden rested on it. In the circumstances, and-for the reasons stated above we see no reasons to interfere with the finding of the learned Collector.
27. The next charge against the appellants was that they had removed 262 rolls admeasuring 26200 L. Metres of flexible PVC film on 27.5.1971 without determining and paying Central Excise duty and without following the procedure regarding production, storage and clearance of goods as required under the various provisions of the Central Excise Rules, 1944. In their reply dated 31.3.1975, the appellants had stated that 262 rolls were cleared under Gate Pass No. 475 dated 27,5.1971 and duty thereon has been duly debited as per Entry No. 229 dated 27.5.1971, in Part II of R.G. 23. They even contended that the department had made the above allegation without verifying the records.
But then, in their letter dated 4.4.1975 addressed to the Collector of Central Excise, the appellants had stated that they have erroneously linked the removal of 262 rolls of flexible PVC films under lorry receipt No. 37969 with Gate Pass No. 475 dated 27.5.71 inadvertently and in this letter they sought to explain the lorry receipt dated 27.5.1971 bearing No. 37969 by stating that on 27.5.1971 they cleared 262 rolls after debiting the correct duty to their proforma accounts against another lorry receipt and they could not clear any more similar goods on the same day because there was no balance left. They had expected production of similar material before the end of May 1971 and for this purpose they contacted their regular carriers for the allotment of a transport on or about the 1st June, 1971 for carrying 262 rolls weighing 4800 kgs. to Delhi and the carriers booked their orders on 27.5.1971 vide lorry receipt No. 37969 on 27.5.1971.
28. The learned Collector had considered this defence of the appellants and had rejected their explanation by observing that if the Transport Contractor had prepared his records it would be only on the basis of goods actually received and not on the basis of the oral request for transporting the goods at a future date. The learned Collector had also taken into consideration the conduct of the appellants in regard to the removal of other quantities of films. The learned Collector, in our opinion had rightly rejected the appellant's contention. If really 262 rolls of films had not been transported under lorry receipt No. 37969 there was no need for the Transport Contractor to prepare a receipt to that effect. If transport was to take place on a future date as contended by the appellants, the receipt would have also borne a future date and there was no necessity to put a date other than the date of actual transport. Shri Ganeshan for the appellants had contended that the appellants had prepared another gate pass bearing No. 476 and subsequently they had cancelled it and they have been submitting R.T.12 returns regularly and the department has failed to take into consideration the cancellation of the Gate Pass No. 476 and the maintenance of proper accounts. This contention of Shri Ganeshan has no force. As has been pointed out earlier in their reply to the show cause notice the appellants have contended that there has been transport of 262 rolls on 27.5.1971 and they had followed proper procedure. Within four days thereafter they tried to explain how the lorry receipt No.37969 came to exist. We have considered their explanation. We find it difficult to accept the explanation. In the circumstances, we agree with the finding of the learned Collector that this charge was also established against the appellants.
29. The last contention of Shri Ganeshan was that the penalty of Rs. 50,000 under Rule 173 Q and Rs. 1,000 under Rule 52-A of the Central Excise Rules are harsh and unjust. Shri Ganeshan urged that the management was unaware of the fictitious documents prepared by the disgruntled excise clerk. There was only a case of removal of 262 rolls. In the circumstances the learned Collector according to Shri Ganeshan was not justified in imposing a heavy penalty on the management.
30. The contention of Shri Ganeshan that the management was unaware of the records maintained in their office cannot be accepted. We were unable to accept the contentions that Shri Dharmapal planted fictitious documents. We also rejected the plea that accountant signed the statement in a routine way. In the said circumstances the contention that the management was sought to be made liable on the basis of the documents of which they were unaware cannot be accepted.
31. Shri Ganeshan did not contest the legality of the penalty, in the sense that such a penalty could not be imposed under law. His contention was that the penalty imposed has no relation to the gravity of the offence. We are unable to agree with this contention also. The clandestine activities of the appellants would not have come to light but for the interception of a lorry belonging to their sister concern.
32. We are satisfied that the appellants had been indulging in clandestine operation. We, therefore see no reason to interfere with the quantum of penalties imposed on the appellants by the learned Collector. The penalties imposed by the learned Collector do not appear to be unjust or harsh in the circumstances of the case. There is no merit in this appeal and the same is rejected.