Skip to content


Garden Reach Shipbuilders and Vs. Collector of Central Excise - Court Judgment

LegalCrystal Citation
CourtCustoms Excise and Service Tax Appellate Tribunal CESTAT Calcutta
Decided On
Reported in(1985)LC341Tri(Kol.)kata
AppellantGarden Reach Shipbuilders and
RespondentCollector of Central Excise
Excerpt:
.....contravention of rule 9(1) read with rules 173f, 173g, 173q(1) (c) & (d) of the central excise rules.rule 173q of the central excise rules, 1944 is reproduced as under:- (a) removes any excisable goods in contravention of any of the provisions of these rules; or (b) does not account for any excisable goods manufactured, produced or stored by him ; or (c) engages in the manufacture, production or storage of any excisable goods without having applied for the licence required under section 6 of the act; or d) contravenes any of the provisions of these rules with intent to evade payment of duty. then, all such goods shall be liable to confiscation and the manufacturer, producer or licensee of the warehouse, as the case may be, shall be liable to a penalty not exceeding three times the.....
Judgment:
1. The Garden Reach Shipbuilders and Engineers Ltd., Marine Diesel Engine Plant, Dharwa, Ranchi, has filed an appeal being aggrieved from Order No. 5l-MP/82 dated the 30th August, 1982 passed by the Additional Collector of Central Excise, Patna. The said appeal was presented in the Registry on the 17th February, 1983 in the form of a revision application along with necessary annexures. The Registry had intimated to the appellant vide letter dated 21st November, 1983 the defects in the appeal and in response to the Registry's letter the appellant had filed another appeal in Form EA-3 on the 17th December, 1983. An application for condonation of delay was also filed duly supported with an affidavit. The delay in the filing of the appeal was condoned by me vide Order No. 331/Cal./1984-2273 dated the 19th September, 1984.

2. Briefly the facts of the case are that the Superintendent of Central Excise, Ranchi and other officers visited by surprise the premises of M/s. Garden Reach Shipbuilders and Engineers Ltd., Dharwa, Ranchi on 24th June, 1982 and 25th June, 1982 and found that Tariff Item 68 goods covered under GP-1 No. 7 dated 9-6-1981 to No. 10 dated 24-6-1981 valued at Rs. 4,58,687.05 involving Central Excise duty to the tune of Rs. 36,694.96 were removed from the factory to Salem Steel Plant without payment of duty. The Collector of Central Excise, Madras was informed through a telegram to seize the engineering goods falling under Tariff Item 68 covered by GP-1 No. 7 dated 9-6-1981, 8 dated 13-6-1982, 9 dated 16-6-1982 and 10 dated 24-6-1982. A show cause notice was issued by the learned Assistant Collector, Central Excise, Ranchi to the appellant for contravention of Rule 9(1) read with Rules 173F, 173G, 173Q (1) (a) and (d) of the Central Excise Rules, 1944 for removal of engineering goods falling under Tariff Item 68 without payment of Central Excise duty to the tune of Rs. 36,694.96. In reply to the said show cause notice vide reply dated 23rd December, 1981 the appellant had stated that no excisable goods were removed without payment of duty and has also pleaded that there was sufficient balance in the P.L.A to cover the duty on all the goods which were to be sent on the 9th June, 1981, and when the first lot was despatched, they had a balance of Rs. 51,000/-. There was no intention of evasion of any Central Excise duty. The appellant also admitted that there was a procedural lapse and this happened due to absence of the dealing clerk.

The appellant had also contended that the amount of duty was duly mentioned in the gate pass but due to mistake, the corresponding entry in the P.L.A. could not be made. The appellant had also pleaded that in future this type of mistake will not be repeated. The learned Additional Collector in his observation stated that though there was no motive on the part of the licencee to evade payment of Central Excise duty, the appellant was careless in maintaining the records. The goods were confiscated. However, the learned Additional Collector had given an option to redeem the goods on payment of a fine of Rs. 20,000/- and a fine of Rs. 500/-was imposed for contravention of the rules. Being aggreved from the aforesaid order the appellant has come in appeal before this Court.

3. Shri H.L. Banerjee, the learned consultant has appeared on behalf of the appellant. He has reiterated the facts. He has admitted the irregularities in not adjusting the duty in the P.L.A. and has pleaded that this lapse occurred due to absence of the dealing clerk. He has pleaded that there was no intention of the evasion of duty. He has submitted that the duty was not adjusted in respect of GP-1 Nos. 7, 8, 9 and 10. He has also submitted that all the gate passes were stamped by the Central Excise authorities and it is a sale from one Govt. of India undertaking to another Govt. of India undertaking. He has also pleaded that there was sufficient credit balance in the P.L.A. and has also filed a photoslat copy of the appellant's P.L.A. He has referred to a judgment of the Hon'ble Supreme Court in the case of Hindustan Steel Ltd. v. State of Orissa reported in 1978 E.L.T. J 159 wherein it was held that "No penalty should be imposed for technical or venial breach of legal provisions or where the breach flows from the bonafide belief that the offender is not liable to act in the manner prescribed by the statute." He has referred to para No. 7 of the said judgment. He has also referred to a judgment of the Special Bench of the CEGAT in the case of Indian Record Manufacturing Co. Ltd., Calcutta v. Collector of Central Excise, Calcutta reported in 1984 (16) E.L.T. 324 (Tribunal) wherein the Hon'ble Bench had held that "The removal of records from the factory to the head office, considering all the facts and circumstances of the case and other records maintained by the appellants, which were produced by them before the excise authorities, cannot be said to have been with intent to evade payment of excise duty. On the facts and circumstances, we do not think that imposition of penalty on the appellants is justified. It is therefore set aside." Lastly he has referred to a judgment of the Special Bench in the case of S.P. Kumria & Sons v. Collector of Central Excise, Allahabad reported in 1984 ECR 1310 wherein it was held that since there was no intention on the part of the appellant to evade payment of Central Excise duty, the imposition of penalty is, therefore, not justified. He has pleaded for cancellation of the penalty and redemption fine.

4. In reply Shri A.K. Sarkar, the learned S.D.R. has pleaded that there is contravention of Rule 9 and Rule 173G and the penalty has been rightly imposed under Rule 173Q (a) & (d) of the Central Excise Rules, 1944. He has referred to page 2 of the Order-in-Original and has pleaded that the debit in the P.L.A. was much later and as such, the order passed by the learned Additional Collector is correct in law.

However, he has admitted that there was no intention on the part of the appellant to evade payment of Central Excise duty.

5. In reply Shri Banerjee, the learned consultant, has again pleaded for acceptance of the appeal.

6. After hearing both the sides and keeping in view the facts and circumstances of the case I hold that there was no intention to evade payment of duty by the appellant. There was sufficient cash balance in the P.L.A. of the appellant. The learned consultant has referred to the judgment of the Hon'ble Supreme Court in the case of Hindustan Steel Ltd. v. State of Orissa reported in 1978 E.L.T. ,1 159 and two other judgments of the Special Bench of the CEGAT referred in para 3 of this order wherein my learned brothers had held that there was no intention to evade payment of duty and as such the levy of penalty was not justified. 1 had also observed in Appeal No. ED (Cal.)-432/83 in the case of M/s. Jay Engineering Works v. Collector of Central Excise, Calcutta reported in 1984 (16) E.L.T. 534 (Tribunal) that where the appellant had made an error but the same was a bona fide mistake and as soon as the appellant had discovered the error he had made payment voluntarily and had also observed that the penalty proceedings are quasi-criminal proceedings and no penalty is leviable unless the element of menu rea is established. In the instant case even the learned adjudicating authority viz., the learned Additional Collector had observed at page 4 of the Order-in-Original that there was no motive on the part of the licensee to evade payment of Central Excise duty. The Hon'ble Supreme Court in the case of Hindustan Steel Ltd. v.Stale of Orissa cited above had observed in para No. 7 of the order that 'No penalty should be imposed for technical or venial breach of legal provisions or where the breach flows from the bona fide belief that the officer is not liable to act in the manner prescribed by the statute.' Relevant extract from Para 7 of the said order is reproduced as under : - "But the liability to pay penalty does not arise merely upon proof of default in registering as a dealer. An Order imposing penalty for failure to carry out a statutory obligation is the result of a quasi-criminal proceeding, and penalty will not ordinarily be imposed unless the party obliged either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation. Penalty will not also be imposed merely because it is lawful to do so. Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances. Even if a minimum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing to impose penalty, when there is a technical or venial breach of the provisions of the Act or where the breach flows from a bonafide belief that the offender is not liable to act in the manner prescribed by the statute. Those in charge of the affairs of the Company in failing to register the Company as a dealer acted in the honest and genuine belief that the Company was not a dealer.

Granting that they erred, no case for imposing penalty was made out." The learned S.D.R. has not cited any case law and he has admitted that there was no intention for the evasion of duty on the part of the appellant. In the instant case show cause notice was issued to the appellant under Rule 173Q(1) (a) & (d) of the Central Excise Rules, 1944 for the contravention of Rule 9(1) and Rules 173F, 173G whereas the penalty has been imposed for the contravention of Rule 9(1) read with Rules 173F, 173G, 173Q(1) (c) & (d) of the Central Excise Rules.

Rule 173Q of the Central Excise Rules, 1944 is reproduced as under:- (a) removes any excisable goods in contravention of any of the provisions of these rules; or (b) does not account for any excisable goods manufactured, produced or stored by him ; or (c) engages in the manufacture, production or storage of any excisable goods without having applied for the licence required under Section 6 of the Act; or d) contravenes any of the provisions of these rules with intent to evade payment of duty.

then, all such goods shall be liable to confiscation and the manufacturer, producer or licensee of the warehouse, as the case may be, shall be liable to a penalty not exceeding three times the value of the excisable goods in respect of which any contravention of the nature referred to in Clause (a) or Clause (b) or Clause (c) or Clause (d) has been committed or five thousand rupees, whichever is greater.

(a) in the case of a contravention of the nature referred to in Clause (a) or Clause (b) or Clause (c) or Clause (d) of Sub-rule (1), the duty leviable on the excisable goods refarred to in that Sub-rule exceeds one lakh of rupees, or (b) any manufacturer, producer or licensee of a warehouse, whose excisable goods were confiscated under Sub-rule (1) and upon whom penalty was imposed under that Sub-rule, contravenes against any of the provisions of Clause (a) or Clause (b) or Clause (c) or Clause (d) of Sub-rule (1) and the duty leviable on the excisable goods in respect of the contravention for the second or any subsequent occasion exceeds ten thousand rupees, then, in a case falling under Clause (a) of this sub-rule or in a case falling under Clause (b) thereof (whether the contravention under that clause has been committed for the second or any subsequent occasion), the officer adjudging the case under Section 33 of the Act may, in addition to the award of confiscation and penalty under Sub-rule (1), direct, for reasons to be recorded in writing, the confiscation of any or all of the following belonging to such manufacturer, producer or licensee of a warehouse, namely : - (i) any land, building, plant, machinery, materials, conveyance, animal or any other thing used in connection with the manufacture, production, storage, removal or disposal of such goods, or (ii) any other excisable goods on such land, or in such building or produced or manufactured with such plant, machinery, materials or thing." A simple reading of Sub-rule (d) of Sub-rule (1) of Rule 173Q shows that penalty is attracted only where an assessee contravenes any of the provisions of these rules with an intention to evade payment of duty.

In the instant case there was no intention of evasion of duty. Even the Revenue authorities themselves have accepted the fact that there was no intention on the part of the appellant to evade payment of duty. During the course of arguments I had brought it to the notice of the learned S.D.R. that in the show cause notice Rule 173Q (1) (a) and (d) of the Central Excise Rules, 1944 has been mentioned and in the order the same has been mentioned as Rule 173Q(1)(c) and(d) ibid. In reply to my query the learned S.D.R. has stated that there appears to be some typographical error. However, he has conceded that there is no corrigendum to this effect.

In view of my above observations, I quash the order passed by the learned Additional Collector as to the confiscation of the goods and levy of fine of Rs. 20,000/- in lieu of confiscation. I also order quashing of the penalty of Rs. 500/-. In the result the appeal is accepted. The Revenue is directed to refund the amount of fine in lieu of confiscation and the penalty amounting to Rs. 500/- within three months from the date of this order after making verification regarding payment of the same. I also warn the appellant to be careful in future so that there should not be any repetition of the default as stated above in future.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //