1. The above appeal arises out of the order of the Additional Collector of Central Excise, New Delhi confirming a demand of duty of Rs. 3,94,200/- on 9250 gross bottles of aerated waters alleged to have been removed clandestinely without payment of duty during the period 1-10-1985 to 31-3-1986 and imposing a penalty of Rs. 40,000/- the case of the Department is based on the clearance of 9250 gross crown corks from the store section to the plant section as indicated in the cardex reports but not entered/accounted for in the raw material register/Central Excise records maintained by the appellants.
2. The brief facts of the case are that the appellants are manufacturers of aerated waters with Plants situated in different places, having a common General Store situated at 30, Industrial Area, Shivaji Marg, New Delhi. This Store supplies raw materials including crown corks to all the Plants of the appellants situated throughout India against requisition slips issued by the Plants and the accountal of the raw materials including crown corks received and issued to various Units is maintained by the General Store on a cardex which indicates particulars such as indent No. , date, quantity, etc. In the middle of 1986 an audit of the appellant unit situated at 1-2, Shivaji Marg as well as of the General Stores was conducted by the local Excise Audit party and certain discrepancies regarding the issue and receipt of crown corks of various brands were pointed out, and the appellants sought to explain the discrepancy in their letter dated 7-10-1986 in which they also explained that a quantity of 8050 gross Campa Lemon crown corks alleged to have been issued to them, was defective and unusable and was lying in the General Stores and was never issued to the appellants' Unit. The appellants were called upon to explain the position in person and on the date of personal hearing before the Collector they also produced photo-copy of cardex and indent notes, etc. No action was taken on the matter thereafter. On 4-9=1989 a show cause notice was issued to the appellants alleging removal of 9250 gross crown corks from Stores Section and manufacture of an equal quantity of aerated waters out of the same, without accountal and clearance without payment of duty. The appellants replied on 3-10-1989 contending inter alia that 8050 gross crown corks were defective and this quantity was never received by them as evident from the Cardex itself and was lying in the General Stores Section; that they had already explained the other discrepancies i.e. discrepancies in respect of the balance quantity of crown corks and also contending that there is absolutely no other evidence in (sic) 3. We have heard Smt. Archana Wadhwa, learned Advocate and Shri A.K.Singal, learned DR and carefully considered their submissions.
4. From the cardex report maintained by the Store Section, it is seen that crown corks as detailed hereunder have been issued to the Plant Section of the appellant unit: (i) 50 gross Mr. Pik crown corks vide indent No. 14331 dated 18-12-1985 (ii) 200 gross Campa Orange crown corks vide indent No. 14306 dated 2-12-1985 (iv) 250 gross count of 500 gross Campa Lemon crown corks vide indent No. 15536 dated 27-10-1985 (v) 150 gross Cola Lite crown corks vide Indent No. 14306 dated 2-12-1986 (vi) 400 gross Campa Cola crown corks vide indent No. 14316 dated 11-10-1985 The appellants have tried to explain the position about the crown corks covered by the indents mentioned above in their letter dated 7-10-1986, which is reproduced below: Letter No. PD/NR/5767-86 dated 7-10-1986 to the Superintendent, Central Excise, Range-1G, New Delhi-15 1. One carton of 50 gross of Mr. Pik (Mineral Water) crown corks were received by us on 18-12-1985 vide Store issue note No. 14331 dated 18-12-1985 for the proposed manufacture of mineral water but this proposal was provisionally waived and, therefore, we did not produce mineral water and the same quantity of said crown corks are still lying with us unused and the same were also physically checked by the audit party.
2. 450 gross of Campa-orange crown corks were received by us on 2-12-1985 vide Store Issue Note No. 14306 dated 2-12-1985 and entered in our Form IV register. However, the above mentioned crown corks were wrongly entered by the Store in their Cardex as 200 gross crown corks of Soda Special, 150 gross crown corks of Tripp and 100 gross crown corks of (Cola-lite) by sheer negligence on the part of the clerk. Actually the store had issued 450 gross crown corks of Campa Orange and we had produced the final product accordingly i.e.
of Campa-Orange which fact can be verified from RG-1 register.
3. On 24-10-1985 we received 2,000 gross crown corks of Campa-Cola, 1000 gross crown corks of Campa-Orange and 500 gross crown corks of Campa Lemon, vide Store Issue Note No. 15536 dated 24-10 (sic) of the above mentioned quantity, 250 gross of Campa Lemon (sic) corks were found to be defective and unusable. We, therefore, returned to Stores 250 gross crown corks of Campa-Lemon before entering into our Form IV account which is evident from our Store Issue Note No. 15536 dated 24-10-1985. Finally we entered into our Form IV register on 24-10-1985 the following quantity of crown corks which were usable : 4. On 17-2-1986 we made our requisition to the stores to issue us 400 gross of Campa-Cola crown corks, vide Store Issue Note No. 14306 dated 17-2-1986. On our requisition the Stores issued us the said quantity but before taking in our Form IV account we inspected the crown corks and found the whole lot defective and unusable and accordingly we sent back the entire quantity to the Stores which was duly received by them and re-entered by them in their cardex which is evident from their Cardex.
5. On 11-10-1985 we received 1000 gross of campa-cola crown corks, 750 gross of Campa-Orange crown corks and 750 gross of Tripp crown corks, vide Store Issue Note No. 15521 dated 11-10-1985 and the same have been duly entered by the Stores in their Cardex as 1550 gross of Campa-cola crown corks, 700 gross of campa-orange crown corks and-750 gross of Campa-Orange crown corks and 750 gross of Tripp crown corks by oversight but physically store issued 1500 gross of Campa-cola crown corks, 750 gross of Campa-Orange crown corks and 750 gross of Tripp crown corks. We had produced the final product accordingly and this fact can be verified from our RG-1 register." However, the explanation cannot be accepted in the absence of the entire records produced by the appellants either before the adjudicating authority or before us indicating movement of defective crown corks from the Production Section to Store Section and vice versa. Further, the Form IV register for receipt of raw material has not been produced before us to substantiate the defence as contained in the letter dated 7-10-1986. Regarding 8050 gross Campa Lemon crown corks alleged to have been issued to the appellant unit on 31-12-1985, no explanation is forthcoming beyond a bare denial of non-receipt of this quantity. The contention of the learned Counsel that this quantity of crown corks represents defective and damaged crown corks which got accumulated over a number of years cannot be accepted for the reason that the entry of this quantity on the Cardex on 31-12-1985 which, according to the appellants represents defective pieces received by the Store Section directly from the crown corks supplier or which become defective during storage and hence not issued does not contain any indication to bear out the above contention. The adjudicating authority has rightly held that it is the normal practice in any production unit that supplies from the Store Department are indicated in the Stores Register. Similarly receipts in the production department are also indicated in the records maintained therein.
It is for the production department to account for every piece of item received from the Stores Department, including defective or damaged items. If goods issued by the Stores Dept. are found to be defective or damaged, their return to the Stores Department is to be covered by an entry in some register maintained by the receiving Section. In these circumstances we are of the view that the initial burden upon the Department in such cases has been discharged on the basis of entries in the Cardex report and the burden has shifted to the appellants to account for the 9250 gross crown corks which is a principal raw material in the manufacture of aerated waters and the appellants have not been able to discharge the burden of proof in respect of the quantity of crown corks in question. We also find that the appellants have not intimated the Department regarding defective crown corks said to be available in the General Store after issue of the same to the Production Section and it is only after physical verification that the Department pointed out that 9250 gross crown corks were issued by the Store Section. Since the crown corks are the principal raw material in the manufacture of aerated waters and in fact determine the exact quantity of production, we agree with the finding of the Additional Collector that the crown corks have been used for the manufacture of different types of aerated waters and cleared without payment of duty.
Accordingly we confirm the demand of duty and penalty uphold the impugned order and reject the appeal.