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Atma Steel (Pvt.) Ltd. Vs. Collector of Central Excise - Court Judgment

LegalCrystal Citation
CourtCustoms Excise and Service Tax Appellate Tribunal CESTAT Delhi
Decided On
Reported in(1985)(5)LC1695Tri(Delhi)
AppellantAtma Steel (Pvt.) Ltd.
RespondentCollector of Central Excise
Excerpt:
1. in this matter, we find that the appellants are engaged in the manufacture of cold rolled strips. on 21st january, 1981, the stocks and accounts of the appellants were subjected to checks by the preventive staff of the central excise, chandigarh. as a result of these checks, the central preventive officers came to the following tentative findings:- (i) there was a shortage of 45.978 metric tonnes of cold rolled strips.the recorded book balance was 60.981 tonnes while the quantity actually found in stock was 15.003 metric tonnes. (ii) 11.333 metric tonnes of cold rolled strips, being the production of 19th and 20th january, 1981, were not accounted for in statutory records. (iii) the appellants had un-accounted for stocks of 84.089 metric tonnes of hot rolled strips when the raw.....
Judgment:
1. In this matter, we find that the appellants are engaged in the manufacture of Cold Rolled Strips. On 21st January, 1981, the stocks and accounts of the appellants were subjected to checks by the preventive staff of the Central Excise, Chandigarh. As a result of these checks, the Central Preventive Officers came to the following tentative findings:- (i) There was a shortage of 45.978 Metric Tonnes of Cold Rolled Strips.The recorded book balance was 60.981 Tonnes while the quantity actually found in stock was 15.003 Metric Tonnes.

(ii) 11.333 Metric Tonnes of Cold Rolled Strips, being the production of 19th and 20th January, 1981, were not accounted for in statutory records.

(iii) The appellants had un-accounted for stocks of 84.089 Metric Tonnes of Hot Rolled Strips when the raw material Register in Form 4, which was written upto 18th January, 1981, showed a closing balance of 15.960 Metric Tonnes of duty paid Cold Rolled Strips.

(i) the seized 11.333 Mts. of Cold Rolled Strips should not be confiscated under Rule 173Q of the Central Excise Rules, 1944, (ii) 84.089 Mts. of Hot Rolled Strips/Skelps be not confiscated under Rule 56A(4), 210 and 9(2) of the Central Excise Rules, 1944, (iii) duty amounting to Rs. 32,874.27 (Rs. 29,885.77 BED and Rs. 2,988.57 SED) on 45.978 Mts. of Cold Rolled Strips, found short, should not e demanded from them under Rule 9(2) of the said Central Excise Rules, (iv) Rs. 19,75,310.60, availed as set off, should not be demanded from them under the provisions of Rule 56A(5) ibid, (v) Rs. 3,32,678.75 availed as proforma credit should not be recovered from them under the provisions of Rule 10 and 56A(5) of the Central Excise Rules, 1944, (vi) the balance amount of credit amounting to Rs. 77,746.27 should not be disallowed under Rule 56A(5) and penal action should not be taken against them under the provisions of Rules 173Q, 9(2), 56A(4), 210 and 198 of the Central Excise Rules, 1944, for contravention of the above-said provisions of Central Excise Law.

2. Shri N.V. Raghavan Iyer, OSD, stated that it had been found that the appellants had regularly been clearing Cold Rolled Strips from their Unit at Ghaziabad on Central Excise Gate Passes, showing payment of duty @ Rs. 650 per Mt, and were availing proforma credits for the amount of such duty paid, on their supposed receipt, into their Dera Bassi unit, and availed of such credits towards payment of duty on the Cold Rolled Strips, manufactured in Dera Bassi. At the time, when the checks were undertaken by the Central Excise Officers on the 21st January, 1981, it was found that as against a closing balance of 15.960 Mts. of duty paid Cold Rolled Strips, shown in the Raw Material Register in Form 4, there were actually no Cold Rolled Strips of the description mentioned in the Gate Passes received from Ghaziabad.

Instead, there was a huge quantity of Hot Rolled Strips/Skelps found lying in their Raw Material Shed. When asked to produce cover documents for the stock of Hot Rolled Strips/Skelps, the appellants produced Gate Passes of Ghaziabad Unit, bearing Nos. 149-150 both dated 20th January, 1981, showing clearances of 14.471 and 12.600 Mts. of Cold Rolled Strips. Since the Raw Material Register, written upto 18th January, 1981, had shown a closing balance of 15.960 Mts., this, together with the receipts under the two Gate Passes in question, made the appellants accountable for 43.095 Mts. of Cold Rolled Strips, which, however, were not found in the Factory. Shri Raghavan Iyer said that the appellants had admitted that 11.333 Mts. of Cold Rolled Strips had been manufactured on 19th and 20th of January, 1981, but not accounted for in their RG-I till 21st January, 1981. In view of this admission, the Collector had rightly held that these goods were liable for confiscation and the appellants are liable for penalty under Rule 173-Q of Central Excise Rules, 1944. Coming to 84.089 Mts. of Hot Rolled Strips under seizure, Shri Raghavan Iyer stated that the Collector had already allowed release of 8.695 Mts., in view of the fact that this quantity was brought to the factory in the presence of Central Excise Officers. The balance of 75.394 Mts. of Hot Rolled Strips under seizure were held by the Collector to have been mis-described as Cold Rolled Strips in the raw material account. Also proforma credit in RG 23 had been fraudulently taken at a higher rate by mis-declaring the Hot Rolled Strips as Cold Rolled Strips. In view of this, the Collector rightly held that the aforesaid 75.394 Mts. of Cold Rolled Strips were liable for confiscation and the appellants were liable for penal action under Rule 173-Q of the Central Excise Rules, 1944. Further, Shri Raghavan Iyer stated that there was an admitted shortage of 45.978 Mts.

of Cold Rolled Strips when the book balance was compared with the actual stock found on physical verification on 21st January, 1981 (excluding the production of 19th and 20th January, 1981, weighing 11.333 Mts.). The Collector came to the finding that the shortage of 45.978 Mts. against the book balance of 60.981 Mts. was not marked that it could be detected by eye estimation and the deficiency should have been brought to the notice of the Central Excise Authority if there were any bona fide reasons. Rejecting the plea of the appellants that they were making entries of production on estimation basis and that the difference found was attributable to bona fide error in such estimation did not carry conviction with the Collector. He, therefore, came to the conclusion that the said 45.978 Mts. of Cold Rolled Strips had been clandestinely removed without payment of duty.

Shri Raghavan Iyer stated further that Shri Jaipal Chandra Rastogi, the Excise Clerk of the appellants, in his statement dated 21st January, 1981, had stated that the appellants had been receiving Hot Rolled Strips from their Ghaziabad Unit as against Cold Rolled Strips mentioned in their Gate Passes and taking credits in their RG 3 on Cold Rolled Strips. Subsequently, Shri R. Chowdhry, Works Manager, informed the Department in his letter dated 23rd January, 1981, that the statement of Shri J.C. Rastogi, made on 21st January, 1981, was not based on facts as Shri Rastogi was not aware of the full facts. Shri Chowdhry stated that they had started receiving Hot Rolled Strips from Ghaziabad Unit against Gate Passes for Cold Rolled Strips only in the 4th week of December, 1981. The reasons for this being shortage of electricity in Ghaziabad Unit, which necessitated transfer of these cold rolled strips to Dera Bassi Unit. Shri Chowdhry also said that due to long and cumbersome procedure for receiving permission for transfer of hot rolled strips from the SAIL authorities, their Ghaziabad Unit had cleared the goods on payment of duty as cold rolled strips. In the show cause notice, allegation had been made that the appellants did not actually receive the goods in the Dera Bassi Unit but took proforma credit on the basis of Gate Passes only. This was denied by the appellants, who produced certain statements by Sales Tax Checkposts at Kundli and Dhulkot showing the movement of the relevant trucks, in which the goods were despatched from Ghaziabad through the two Checkposts, as proof that they had been receiving the goods in their units and not the Gate Passes only. The Collector, however, has preferred to rely on the statement of Shri Rastogi dated 21st January, 1981, that the appellants had been receiving Hot Rolled Strips and had been taking credits on the basis of Gate Passes received from their Ghaziabad Unit for Cold Rolled Strips. He has rejected the statement of the Works Manager as an afterthought, since Shri Chowdhry had countersigned the statement of Shri Rastogi. There are three facts which have influenced the Collector in rejecting the statement of Shri Chowdhry, firstly that the stock of raw material found at the time of the visit of the preventive officers on 21st January, 1981, was hot rolled and, secondly, on comparison of seized goods with the Gate Passes, it was found that the sizes indicated in the Gate Passes were different from the sizes of the goods seized. Thirdly, on an enquiry from Ghaziabad, it was reported that the materials sent under Gate Passes were cold rolled strips and not hot rolled strips. The Collector has also rejected the defence of the appellants that the goods in question were partly cold rolled in Ghaziabad and partly in Dera Bassi, as he has considered it both technically and economically not feasible.

In view of this finding, the Collector has held that the appellants had procured hot rolled strips from other manufacturers without paying proper duty and fraudulently taken credits and availed of set off duty in respect of the said goods as cold rolled strips under cover of Gate Passes received from Ghaziabad unit. Accordingly, he held that the appellants "mis-utilised Rs. 2,14,850.45 on the clearance of goods on which proforma credit was not permissible" and ordered the recovery of the said amount under Rule 56A(5) of Central Excise Rules. He also held that the appellants wrongly availed set off of duty amounting to Rs. 19,75,310.60 which, he ordered, should be recovered from the appellants under Rule 10 of Central Excise Rules, 1944. ' The Collector held that 11.333 metric tonnes of cold rolled strips and 75.394 metric tonnes of hot rolled strips were liable to confiscation. Since they had already been released to the party provisionally, he imposed fines of Rs. 25,000/- and Rs. 1,00,000/- in lieu of confiscation, under Section 34 of Central Excises and Salt Act, 1944. Further, the Collector imposed a personal penalty of Rs. 20 lakhs on the appellants under Rule 173Q of C.E. Rules, 1944, for violation of Rules 9(1), 52A, 53 and 173G of Central Excise Rules. In addition, he imposed personal penalties of Rs. 1,000/- under Rule 198 for giving misleading information to Central Excise Officers and also personal penalties of Rs. 2,000/- under Rules 56A(4) for violation of Rule 56A ibid.

3. Shri M. Chandersekharan, Advocate, appearing on behalf of the appellants, stated that appellants are a Private Ltd. Company, engaged in the manufacture of Cold Rolled Strips in their factories located in Ghaziabad (Uttar Pradesh) and Dera Bassi (Punjab). The raw materials used by the appellants' factory at Dera Bassi were Skelps/Hot Rolled Coils, which were manufactured only by Tata Iron and Steel Co. Ltd. and Steel Authority of India Ltd. and this material was being received mostly from SAIL direct and, in some cases, also from other consignees, which had received them from SAIL, duly covered by challans, invoices, which showed that duty had been paid on the goods. They were also receiving Hot Rolled/Cold Rolled Strips from the appellants' factory in Ghaziabad. The Cold Rolled Strips produced by the Dera Bassi factory were supplied to M/s. Atma Tube Products Pvt. Ltd. a Sister Concern of the appellants. The strips received from Ghaziabad were duty paid and the appellants were allowed to avail of the Rule 56A procedure by the Collector of Central Excise, Chandigarh. During the relevant period, Shri Chandersekharan submitted, the production of Hot Rolled Strips by the main producers had continued to be inadequate for the country's requirements, with the result that the supplies were rationed.

Allotments were made on monthly basis by the Steel Priority Committee, appointed by the Government of India. It was a condition of such allotments that the materials lifted were to be used only for the purpose for which they were allotted (Cold Rolling in the case of the appellants). However, in December, 1980, the availability of raw materials improved substantially and the appellants were allotted 1,766 tonnes, which was more than 3/2 times the allocation of the preceding six months. On the other hand, at that very time, the availability of power in Uttar Pradesh declined steeply and a power cut, which was to the extent of 331/3 per cent during the preceding period was enhanced to 50% with effect from 2nd December, 1980. In view of the large stock of Hot Rolled Strips, the appellants decided in December, 1980, to transfer a part of their stock to their Dera Bassi factory. Realising that the appellants could not transfer the Hot Rolled Strips from the Ghaziabad Unit to Dera Bassi without the prior permission of the Iron and Steel Controller and also apprehending that such permission, even if applied for, was not likely to be accorded, the appellants decided to transfer some of their stocks to Dera Bassi, after subjecting the Hot Rolled Strips to the process of gang slitting and, in some cases, pickling, and since these processes were a part of the various processes undertaken for cold rolling, it was felt that they could be considered as Cold Rolled Strips, thereby avoiding contravention of the condition of allotment. Shri Chandersekharan has admitted that, strictly speaking, it may not have been correct to assume that, as a result of this process, the strips had been converted into Cold Rolled Strips. However, it was decided to describe them as such and duty was paid thereon at the higher rate of Rs. 650/- per Metric Tonne, as applicable to Cold Rolled Strips.

The goods, in question, were also described in Excise documents, namely RG I, Gate Passes and other records as Cold Rolled Strips. It was emphasised by Shri Chandersekharan that if the goods had been cleared as Hot Rolled Strips, they would have been liable to duty @ Rs. 450/- per Metric Tonne and the additional liability of Rs. 200/- per Metric Tonne would have developed on the appellants' Dera Bass Unit, at the time of the clearance of the goods by them, after processing, to their Tube Factory. It was claimed by Shri Chandersekharan that there was no attempt in this process to defraud Government revenue. It was further stated that transactions of this nature from Ghaziabad to Dera Bassi involved 17 consignments, amounting to 235.045 Mts of slit and pickled Hot Rolled Strips, beginning from 27th December, 1980. It was emphasised that the goods were transported through professional Transport Agencies, under cover of Transfer Memos, in addition to statutory Gate Passes as also goods receipts issued by the Transport Agency. Each consignment was checked on arrival at the Dera bassi Unit by the Security Staff of the Factory and, on goods receipt and transfer memo, an endorsement was made in token of this check, evidencing thereby not only the receipt of the goods but also the date and time of receipt. Each transfer memo and goods receipt also carried the signature of the checking officer and the factory stamp. The goods receipts were delivered back by the truck drivers to the Transport Agency who, in turn, sent them to the appellants' factory in Ghaziabad, together with their claim of payment of transportation charges. Within 24 hours of receipt of goods in Dera Bassi, due intimation was sent in Form D-3 to the Central' Excise authorities incharge and the goods were promptly taken on stock in the raw material account prescribed under Rule 173G of the Central Excise Rules, as well as the RG 23 account maintained in terms of Rule 56A. Shri Chandersekharan also pointed that the goods sent from Ghaziabad to Dera Bassi passed through Sales Tax Barrier at Kundli on the Delhi-Haryana border and Dhulkot on the G.T.Road beyond Ambala, just before the goods entered the State of Punjab.

At both these Checkposts, all the relevant particulars, such as the number of trucks, the contents therein, their origin and destination and the date and time of passage through the Checkposts are recorded.

On receipt of the goods in the Dera Bassi unit, they were subjected to further processing for conversion into Cold Rolled Strips and then supplied mostly to M/s. Atma Tube Products Pvt. Ltd. The Cold Rolled Strips so produced and the clearances of such goods from the Dera Bassi Unit were duly recorded in the statutory records. This was evidenced by regular invoices issued by the Dera Bassi factory to the Tube factory and other buyers. Shri Chandersekharan stated that there was no evidence whatsoever to support the sweeping allegations against the appellants that right from May, 1979, to January, 1981, for a period of 21 months, despite all the documentation available, no goods had been received by the Dera Bassi Unit from Ghaziabad or that the Ghaziabad Unit had been supplying only Gate Passes to the Dera Bassi Unit to enable it to fraudulently claim proforma credit under Rule 56A and that, during the said period the entire stock, amounting to nearly 4,000 Metric Tonnes of Hot Rolled Strips, was received by the Dera Bassi Unit through illegal channels.

4. Dealing specifically with the allegations made against them and the findings of the Collector, Shri Chandersekharan maintained that in so far as 11.333 Mts. which was the production of 19th and 20th January, 1981, was concerned, this had been declared by the factory itself and it could not be entered in the RG I on account of the absence of the Excise Clerk. Since the raw material itself, out of which the goods had been produced, was duly reflected in the Raw Material Register and the appellants were liable to account for it, there could be no justification for holding that this production was not accounted for with an intent for clandestine removal. In so far as the alleged shortage of 45.978 Mts. of Cold Rolled Strips is concerned, it was explained that this was on account of the fact that the raw material was issued for conversion and the Cold Rolled Strips manufactured therefrom recorded on a pro rata estimation basis while the quantities, which were actually cleared, were weighed. Shri Chandersekharan maintained that the bona fides of the appellants are established by the fact that there was no attempt substitute or make good the deficient quantity by fresh production. Regarding the stock of 84.089 Mts. of Hot Rolled Strips found on the premises on 21-1-1981, it was clarified that this included 8.695 Mts. received from Ludhiana on the same day and in respect of them no allegation was sustainable. In so far as the rest of the stock of Hot Rolled Strips was concerned, it was stated that this had been received from Ghaziabad from about the end of December, 1980, in the manner mentioned by Shri Chandersekharan earlier. Therefore, while admitting the discrepancy in the description of the material, it was maintained that there was no loss of revenue involved because duty had already been paid at a higher rate of Rs. 650/- per Metric Tonne, at the time of clearance of goods from Ghaziabad factory. It was strongly emphasised that, in the face of mass of documentary evidence available to the contrary, there was nothing to support the allegation that no Cold Rolled or Hot Rolled Strips had been received from Ghaziabad factory in the Dera Bassi factory since May, 1979, or that no proforma credit was admissible in respect of the goods in question or that the availment of such proforma credit was wrong or fraudulent. In respect of the credit of Rs. 3,32,678.75, availed of by the appellants in respect of Hot Rolled Strips/Skelps received during the period from 1-8-1980 to 21-1-1981, it was stated that this included goods which had been received from the Steel Authority of India on proper invoices which carried the certificate that appropriate duty of excise had been paid. Absence of subsidiary Gate Passes does not establish that the goods were non duty-paid and, therefore, not entitled to proforma credit. As regards the alleged shortage of 45.978 Mts. in the stock of Cold Rolled Strips, Shri Chandersekharan stated that in view of the position stated that the goods received from 27th December onwards were indeed Hot Rolled Strips although accounted for as Cold Rolled Strips, the said shortage was, in fact, a part of stock of Hot Rolled Strips amounting to 84.089 Mts. found on the premises on 21-1-1981, the break up of this stock being as under:-(i) Quantity received from Ghaziabad - 27.135 Mts.

on 21-1-1981, described as Cold(ii) Quantity received from Ludhiana, - 8.695 Mts.

which was admittedly Hot Rolled.(iii) Quantity accounted for as Cold - 45.978 Mts.

Rolled on the strength of The discrepancy of 2.281 Mts. was said to be attributable to errors in weighment, etc. Shri Chandersekharan stated that the appellants had already paid duty on 45.978 Mts. on the 23rd February, 1982, requesting, at the same time, the Collector to take a lenient view of the lapses, on account of the extenuating circumstances. It was also strongly urged before the Collector that the appellants confessed with the greatest regret that their unit in Ghaziabad, in view of the compulsions discussed earlier, had resorted to mis-description of the goods and all the alleged contravention of Excise Laws and requirements occurred as a sequel thereto.

5. Shri Chandersekharan further contended that the issue of shortages and excesses in the Dera Bassi Unit can be clarified only if the situation, as found by the visiting Central Excise Officers on 21st January, 1981, is viewed in totality i.e. in relation to total stocks and not with reference separately to Hot Rolled Strips and Cold Rolled Strips. According to Shri Chandersekharan, the position that would emerge from this appreciation of the totality of the stocks would be as follows:-(i) Balance as indicated in the R.G. 1 - 60.981 Mts.

record (Cold Rolled Strips) vide(ii) Balance as indicated in the Form IV - 15.960 Mts.

record (Cold Rolled Strips) vide(iii) Production of 19-1-1981 and 20-1-1981, - 11.333 Mts.

as reported by the appellant itself.(iv) Total quantity for which the appellant - 88.274 Mts.

was accountable.

_____________II. POSITION AS ACTUALLY FOUND BY THE VISITING OFFICER ON 21-1-1981:(i) Cold Rolled Strips in stock vide - 26.336 Mts.

para 3 of the A.O.(ii) Hot Rolled Strips in stock vide para 7 - 84.089 Mts.

of the A.O.(iii) Total stock found - 110.425 Mts.(iv) Deduct quantities received (a) Received from Ghaziabad - 27.135 Mts.

(b) Received from Ludhiana - 8.695 Mts.

(c) Total - 35.830 Mts.(v) Stock actually found against the - 74.595 Mts.

recorded balances of statutory 6. Shri Chandersekharan said that, in view of the foregoing facts and evidence on record, there is no justification for the heavy penalties, denial of balance available in proforma credit and demand of duties by the Collector.

7. We have carefully considered the submissions made before us by both sides as well as the evidence on record. This is an extraordinary case where the appellants are themselves admitting that they are guilty of misdescription of excisable goods, consequent upon such misdescription, designed to short-circuit the requirements of the Iron and Steel Controller, they also claim that they paid a higher rate of duty as per the misdescription of the goods on clearance from their Ghaziabad factory and availed of proforma credit/set off on receipt of these goods in the Dera Bassi factory, in accordance with the higher duty paid on these goods. On the other hand, we find that the Department has taken an extraordinary view in the matter and, relying merely on some rather ambiguous statement of one of the junior officials of the Dera Bassi factory run to the conclusion that there was, in fact, no physical movement of goods from the Ghaziabad factory to the Dera Bassi factory but, instead, only the despatch of Gate Passes, to cover the receipt of goods of other description by the Dera Bassi factory from elsewhere. What is more that, without any actual evidence either that the goods of the Ghaziabad factory have moved elsewhere or of any other source from which Dera Bassi factory allegedly received the goods, the appellants have been held guilty and in consequence liable to large demands of duties and heavy penalties. Also we find that these findings as regards guilt and liability have been limited not merely to the goods available at the time of checks by excise officials but all receipts prior to the date. What particularly amazes us is that the departmental officers in booking the case against the appellants have made sweeping allegations, based on perfunctory or no enquiry. Also, in a case which rests mainly on presumptions, no attempt has been made to verify the factual accuracy of the explanations tendered by the appellants. It should not have been difficult for the department to verify, for instance, whether there was any truth in the compulsions claimed, which made the appellants decide to transfer their Hot Rolled Strips to Dera Bassi factory. It could easily be verified whether in December, 1980, the Ghaziabad unit of the appellants was suddenly allotted a quota 3 1/2. times their average allocation of preceding six months and also whether, at the same time, the Uttar Pradesh Government did impose a 50% power cut in respect of this unit. Similarly, in the entire proceedings there has been no attempt to deal with the appellants' claim of the full accountal of the movement of their goods right from the stage of despatch from the Ghaziabad factory through the various Checkposts en route and down to the stage of the receipt of the goods at the Dera Bassi factory, as evidenced from the transfer memos, statutory gate passes, receipts issued by transport agency, endorsements on receipts in the factory of destination, intimations in Form 3 sent by the Dera Bassi factory to the local Central Excise Officers and the detailed information available datewise of the lists of trucks which passed through Kundli Sales Tax Barrier at Kundli on the Delhi-Haryana border and Dhulkot on the G.T. Road beyond Ambala, on their way to the Dera Bassi factory. At both these Checkposts, full information was available as regards the number of the trucks, the contents thereof, their origin and destination and even the date and time of passage through the checkposts. Considering the very short time in which the goods have moved from the Ghaziabad factory to Dera Bassi, as evidenced by this information, there is no explanation from the department how they have come to the conclusion that the goods actually despatched from the Ghaziabad factory moved elsewhere and some other goods were transported in lieu thereof to Dera Bassi factory. In fact, there is no attempt at any verification even with the transport agencies, the Sales Tax authorities, etc. as regards the movement of the goods from Ghaziabad unit to the Dera Bassi unit. We find that on the day the Central Excise Officers made their checks on the Dera Bassi factory and booked the case against the appellants, certain goods had just been received from Ludhiana. Since the department was tentatively of the view that the Dera Bassi factory was obtaining its supplies of goods mostly from sources other than their Ghaziabad unit, they should have undertaken investigation in respect of the supplier of the consignment in question, to find out whether he had made other supplies or that there were other suppliers. It appears that either such inquiries were not made or that such inquiries were made but the results were not referred to by the department because they did not support the allegations against the appellants. Ignoring the mass of evidence brought forward by the appellants, to show that the despatches and receipts at the Ghaziabad and Dera Bassi Units were fully accounted for, the Learned Collector has chosen to rely on the statement of Shri Rastogi, Excise Clerk of the appellants, who, in terms of the Adjudication Order "stated that they had been receiving Hot Rolled Strips from their Ghaziabad Unit as against the Cold Rolled Strips mentioned in the Gate Passes and taking the credit in their RG 23 of Cold Rolled Strips, on the basis of Gate Passes and they had also been filing D-3 information on the basis of Gate Passes". There are two conclusions that the Collector has arrived at on the basis of this statement of Shri Rastogi. One is that the appellants had been taking proforma credit on the basis of gate passes only and not on the basis of receipt of Cold/Hot Rolled Strips received under the cover of those gate passes and, secondly, that they were doing this right from 1979.

In this connection, he rejected the clarification of the Works Manager that they had started receiving Hot Rolled Strips only in the 4th week of December, 1980. We feel that there is nothing, even in the statement of Shri Rastogi, to warrant either of these conclusions and, in any case, the statement of Shri Rastogi had to be interpreted against all the other facts and circumstances of the case, including the available records and documentation.

8. In view of the foregoing facts, we requested Shri Chandersekharan to furnish detailed statements containing data as regards the movement of the goods from Ghaziabad factory and through the Dhulkot and Kundli Checkposts, right to the stage of the receipt of the goods in the Dera Bassi factory. This data was furnished and duly verified by Shri Raghavan Iyer, OSD, who has conceded that in view of this detailed information there appears to be no doubt as regards the receipt of the goods in the Dera Bassi factory.

9. In so far as the alleged shortage of goods is concerned, a view of this has also to be taken on the basis of the position as regards due receipt and full accountal of the goods despatched from the Ghaziabad factory and received in the Dera Bassi factory. Shri Raghavan Iyer has conceded that on the basis of verification of figures of raw materials received and goods manufactured and cleared during May, 1979, to 21st January, 1981, by the Dera Bassi unit, the net shortage comes to only 29.556 Mts. This is considered negligible against the total quantity of raw material accounted for and processed by the said unit. The appellants' contention that this shortage is on account of eye estimation in the accountal of the goods lying in stock is considered not unreasonable.

10. In view of the above findings, we hold that the allegation that the appellants removed 45.978 Mts. of cold rolled strips clandestinely is not established. Consequently, the demand for duty on these goods is not maintainable and is, therefore, set aside. Further, we hold that 11.333 metric tonnes of cold rolled strips and 75.394 metric tonnes of hot rolled strips are not liable to confiscation. Accordingly, imposition of fines of Rs. 25,000/- and Rs. 1,00,000/-respectively in respect of them, in lieu of confiscation, along with Rs. 15,000/- of undefined liabilities, is not maintainable and is set aside. We also hold that on the facts of the case, it is not established that the appellants wrongly availed of set-off duty under Notification No. 75/67 to the extent of Rs. 19,75,310.60 and, therefore, the demand of this amount is also not maintainable and is set aside. Again, we hold that it has not been established that the appellants wrongly availed of proforma credit to the extent of Rs. 2,14,850.45 and, therefore, the demand for this amount is also not maintainable. It is, therefore, set aside. The relevant Rules fully authorise availment of proforma credit/set off against duty actually paid. It has not been shown that the appellants availed of credit or set off in respect of the goods on which duty had been paid, as claimed.

11. We feel, however, that the appellants are guilty of serious procedural irregularities and, therefore, imposition of penalty is amply justified. However, we are of the view that it would meet the ends of justice if the penalty is reduced to Rs. 1,00,000/- 12. Accordingly, the appeal is partly allowed and the impugned order is modified, with consequential relief to the appellants, as per directions indicated above.


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