1. The Collector of C.E., Calcutta, has filed an appeal being aggrieved from the Order No. 33/Cal./ 83, dated 15-1-1983 passed by the Collector (Appeals), C.E., Calcutta.
2. Briefly, the facts of the case are that the Respondents, M/s. Jenson & Nicholson (I) Ltd., are manufacturers of paints and varnishes falling under Tariff Item 14 of Central Excise Tariff. To manufacture the said goods they receive inputs falling under Tariff Item 14 and Tariff Item 12 from outside and avail the benefit of proforma credit under rule 56A of Central Excise Rules, 1944. In the year 1981, annual stock taking was undertaken under rule 223A of Central Excise Rules, 1944 in respect of the stock of inputs held by the said company in the R.G. 13 (Pt. 1) maintained under-Rule 56A and shortages were detected against the various items of inputs falling under Tariff Items 14 and 12 of the C.E.T. A show cause notice to the Respondent Company vide C. No.G.L.-28/111/Cal-VIII/81/379, dated 29-3-1982 asking them to show cause as to why the Central Excise duty amounting to Rs. 4,113.72 on the quantity of inputs found short in the stock should not be paid and the Respondent had filed a reply to the said show cause notice vide letter dated 18th May, 1982. In the said reply the Respondents had pleaded that the charge of non-accountal of the quantity of products found short at the time of annual stock taking of 1981 resulting demand of duty of Rs. 4,113.72 involved on such shortages and imposition of penalty is not established. In view of the fact that the appellant is the manufacturer of varnishes and paints for a very long time, the goods received under Rule 56A are stacked in Respondent's factory for a considerable period and undergo natural storage loss or excess. The respondent also submitted that in each year there is an annual stock taking on such goods under Rule, 223A and the shortage and excess found in the annual stock-taking report are recorded in the Stock Register.
In the said reply the appellant had given the details of the shortage.
The relevant extracts from the said details are reproduced as under :-------------------------------------------------------------Sl. No.Products Shortages Detected Percentage (1) (2) (3) (4)-------------------------------------------------------------T. I. No. 14 14.
Oxide Green -0.10 -1.176%T. I. No. 12 7. Alkyd Refined Linseed Oil -0.693 -9.661%------------------------------------------------------------- The respondent has also pleaded that the above items were received in bags, barrels, tins etc., in huge quantities but all the materials were issued in piecemeals in small quantities whereas the receipts of the products is in huge quantities and the losses are due to storage leakage and handling in small quantities. The losses are very meagre.
The learned Assistant Collector did not accept the contention of the Respondent and had raised a demand of duty of Rs. 4,113.72 after allowing l% loss. Aggrieved from the aforesaid order, the Respondent had filed an appeal before the Collector (Appeals) which was accepted.
Being aggrieved from the aforesaid order the Revenue has come up in appeal before this Court as an appellant.
3. Shri A.K. Saha, the learned S.D.R. has pleaded that the respondent was enjoying the proforma credit under Rule 56A. He has submitted that the loss has occurred due to handling and leakage and is not a natural cause. He has referred to his grounds of appeal. He has also referred to the judgment of Kola Venkatanarayan v. Special Secretary to the Government of India reported in 1981 E.L.T. 171 of the Hon'ble High Court. In the said judgment, it was held that it is not possible for the authority to say whether the petitioner has illegally or wilfully removed any material for stock, therefore, it cannot be said that unless such removal is proved, the quantity of loss pleaded for the petitioner must be accepted. He has also pleaded that the order passed by the Collector (Appeals) is not correct in law and as such the same should be quashed.
4. Shri K.K. Banerjee, the learned Advocate has appeared on behalf of the Respondent. He has pleaded that the provision of Rule 56A of Central Excise Rules, 1944 has not been invoked. He has referred to para 2 of the show cause notice. He has also referred to show cause notice issued under rule 223A dated 29th March, 1982. He has referred to para 6 of the Assistant Collector's order wherein it has been mentioned the goods have been cleared without payment of duty. The same is reproduced as under : "However, under Serial No. 3, 6, 8, 12, 13, 14= % T.I. 14 and 17 under I.T. No. 12 of the Schedule to stock taking losses the shortages were found more than 1% and it is clear that the said goods against such variety were cleared without payment of duty." The learned Advocate has particularly referred to the above para and has pleaded that there is evidence on record which shows that the goods have been cleared by the respondent without payment of duty or in any clandestine manner. He has fortified his argument with the judgment of the Supreme Court in the case of Rukmanal Bairoliya v. State of Bihar and Ors.. In the said judgment, the Hon'ble Court has observed that the findings of the Revenue Authorities based on poor assumption and conjecture and on no evidence whatsoever should be quashed. The learned Advocate has pleaded that a decision which is based on assumption, on the basis of the Supreme Court judgment is not a good decision. The learned Advocate has also pleaded that no new point can be taken by the appellant to set up a new case. He has referred to the judgment of the CEGAT reported in 1983 E.L.T. 1830. in the case of Lakshmanpal National Ltd. v. Collector of Central Excise. He has pleaded that in the said case the Tribunal did not permit the setting up of a new case Lastly, he has referred to Rule 223A.5. In reply, Shri A.K. Saha has pleaded that Rule 56A has been duly mentioned in para 1 of the show cause notice and the Respondent's learned counsel's argument to the effect that there is no mention of Rule 56A in the show cause notice is not tenable. He has further pleaded that wherein the quantities of goods which have not been accounted for under Rule 56A, duty has to be paid by the assessee.
Lastly, he has argued that the loss due to leakage and handling can never be considered as loss due to natural causes and hence cannot be condoned ever under Rule 223A. The Revenue has already allowed a very reasonable loss of 1%.
6. After hearing both the sides, and going through the facts and circumstances of the case, I find that the order passed by the Collector (Appeals) is correct in law and facts. The learned Assistant Collector has observed that the goods were cleared without payment of duty. I have gone through the records of the case. There is no evidence on record which can lead to the inference that the respondent has cleared the goods without payment of duty in view of the Supreme Court judgment cited by the learned counsel of the respondent in the case of Rukmanand Bairoliya v. State of Bihar and Ors. reported in AIR 1971 S.C. 746. The Hon'ble Court had observed that the findings of the Revenue Authorities are based on poor assumptions and conjectures and on no evidence whatsoever should be quashed. I very respectfully follow the judgment of the Hon'ble Supreme Court. However, before I conclude the judgment, I make it clear that higher percentage of shortage accepted in this will not be a precedent. The learned SDR's argument that the shortage due to handling and leakage is not a natural loss is also not tenable in view of the Madras High Court's judgment in the case of A. Loganathan v. Union of India reported in 1978 E.L.T. (J 707) (not cited by the parties) wherein it was held that the deficiency was due to driage to tobacco caused by natural causes.
7. In the result, the appeal filed by the Revenue fails and the same is dismissed.