TMI Blog2023 (10) TMI 384X X X X Extracts X X X X X X X X Extracts X X X X ..... LTD. VERSUS THANE MUNICIPAL CORPORATION [ 1991 (9) TMI 162 - SUPREME COURT] it was observed that non-observance o f even a procedural condition not to be condoned if likely to facilitate commission of fraud and introduce administrative inconveniences. Admittedly, if the condition is so important that non-observance of the same may result in fraudulent activity, such condition cannot held to be an empty formality. In any case when the entire case is based on the records maintained by the appellant, there are no justification in such observations which have been reproduced by the Commissioner (Appeal) in routine and stereotype manner without even examining even the panchnama. The quantum of excess and shortages determined by the exercise of stock taking is negligible in all cases except for the scrap. The stock taking errors and the weighing scale errors etc could have accounted for the shortages and excesses. The decision relied upon in the impugned order, the will not support the case of department without any explicit and conclusive evidence in respect of the clandestine clearance being alleged. Further the goods which were still in the factory premises of the appellant h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, at the applicable rates from the party, under Section 11AA of the Central Excise Act, 1944. (iv) I impose penalty of Rs. 3,28,465/- (Rupees Three Lacs Twenty Eight Thousand Four Hundred and Sixty Five Only) upon M/s Shree Shyam Pipes Ltd in terms of Rule 25 of Central Excise Rules, 2002 read with section 11AC of the Central Excise Act, 1944. (v) I order to confiscate the vehicle (truck bearing No HR 55P 4363) found to be carrying goods found in excess as per detailed discussed above. I impose redemption fine of Rs. 20,000/- (Rupees Twenty Thousand Only) upon M/s Hari Cargo Movers, Randhir Yadav Compound, Sihi Sikdapur, Kherki Daula, Gurgaon, in lieu of confiscation of aforesaid truck under Section 34 of Excise Act, 1944. Further, I order to appropriate the Bank Guarantee of Rs. 20,000/- (Rupees Twenty Thousand Only) which was furnished by the noticee, against said redemption fine. (vi) I impose penalty of Rs. 5000/- (Rupees Five Thousand Only) upon M/s Hari Cargo Movers, Randhir Yadav Compound, Sihi Sikdapur, Kherki Daula, Gurgaon in terms of Rule 26 of Central Excise Rules, 2002. 2.1 Appellant is manufacturer of copper tubes and installation kits falling in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the appeal. Aggrieved appellant have filed this appeal. 3.1 I have heard Shri D. K. Tyagi, Advocate for the appellant and Shri Sandeep Pandey, Authorized Representative for the revenue. 3.2 Arguing for the appellant learned counsel submits that: ⮚ Shortage of 84.7 Kgs found on physical stock verification is due to human error in identifying the exact size of pipes since weighed in small quantity on a kanta of I MT capacity. The shortage of 84.7 kgs in available stock of 2530 Kgs cannot be on account of clandestine clearance. Reliance is placed on the decisions reported at [2015 (325) ELT 193 (T-Del)], [2015 (321) ELT 330 (T-Del)], [2015 (316) ELT 497 (T-Del)], [2013 (298) ELT 117 (T-Del)], [2015 (317) ELT 298 (T-Del)], [2011 (274) ELT 180 (ALL)]; ⮚ Excess was due to eye estimation of various sizes of pipes. The alleged excess was lying on the manufacturing floor in unpacked condition. This stock would have been entered in the books of account on 12.05.2015 as the same was production of 10.05.2015 and 11.05.2015 was holiday. The production on the day of visit has not been considered. ⮚ Stock of scrap of defective pipes lying on the floor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t maintaining any requisite records of purchase, production and sale of finished goods as well as raw material, shortage of finished goods and a truck loaded with scrap without documents. The search proceedings do not suffer from any infirmity, the statements are recorded in conformity with law and not retracted. The panchnama proceedings of search process were carried out in accordance with the relevant statutory provisions in the presence of independent witnesses. 5.4 Further, I find that the difference (shortages/ excess) in stock, recorded in the presence of the independent witnesses has been supported by the statement of the authorized signatory, who have accepted the discrepancy both shortage and excess, found in stock. Non recording of correct quantity of goods in the book of accounts maintained by the appellant establishes the case for demand of duty. 5.5 I find that the appellant has not presented any credible defense for not maintaining any statutory records. I hold that the objection regarding manner of stock verification is superfluous and doesn t hold good. 5.6 I understand that the law recognizes well settled principle of administrative inconvenience ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccess to a registered premises.- (1) An officer empowered by the Commissioner in this behalf shall have access to any premises registered under these rules for the purpose of carrying out any scrutiny, verification and checks as may be necessary to safeguard the interest of revenue. (2) Every assessee shall furnish to the officer empowered under sub-rule (1), a list in duplicate, of all the records prepared or maintained by the assessee for accounting of transactions in regard to receipt, purchase, manufacture, storage, sales or delivery of the goods including inputs and capital goods. . As per the above rule there are no separate statutory records prescribed under the Central Excise laws but the records maintained by the assessee in normal course of his business are considered as statutory for the purpose of Central Excise Law. Panchnama records as follows: On being asked to produce the records/ Registers maintained by them in respect of Finished goods and raw material, and other records such as Cenvatable invoices, sale invoices etc., Shri Krishna Kumar Sharma informed that they are maintaining the stock of Finished goods manually in Register RG 1. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... finished goods as verified by the officers with the Book Balance i.e. RG 1 register maintained by the party certain differences (shortage/ excess) were noticed. Further while taking round of the factory and conducting the physical verification of the stock of finished goods a truck bearing Registration No HR 55 P 4363 was found inside the factory loaded with copper scrap. On being asked whether any document such as invoice/ challan has been prepared in respect of the goods loaded in the truck, Shri Sharma informed that no document has been prepared till the time of visit of the officers. On being asked about the quantity of copper scrap loaded in the said truck Shri Mohd Abdul informed that 5002.025 Kgs of Copper scrap has been loaded in the truck. He also produced the slips showing the weighment details which were prepared by him when the goods were being physically weight on the weigh bridge installed in the unit (having capacity of 1.00 MT) at the time of loading. As the truck was inside the factory, therefore, the quantity of scrap loaded in the said truck has also been taken in the total stock of scrap physically verified. On being asked to explain the reasons for shortages an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egister 23 Inward Register 24 Loose paper. The observations made in the impugned order to effect that the appellants were not maintaining the record is contrary as the entire case of the department is based on the Book Balance in the book of accounts and physical stock found at the time of visit. Further department itself has resumed these documents as seen by the above Annexure. Thus the decisions relied upon by the Commissioner (Appeal) in the impugned order for invoking the concept of administrative inconvenience etc., would not apply to the present case. In any case when the entire case is based on the records maintained by the appellant I do not find any justification in such observations which have been reproduced by the Commissioner (Appeal) in routine and stereotype manner without even examining even the panchnama. 4.4 Relevant extract of the Annexure A to Panchnama dated 12/13/05.2015 is reproduced below: Copper Pipe Quantity in Kgs Amount in Rs S.NO. Description ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3/4 x 16-26 SWG 212.00 413.00 201 487.03 97893 12237 14 7/8 x 16-26 SWG 137.90 127.80 -10.1 481.03 -4858 -607 15 1 1/8 x 16-26 SWG 26.70 10.20 -16.5 487.03 -8036 -1004 16 1 3/8 x 16-26 SWG 0 10.20 10.2 514 5243 655 17 1 5/8 x 16-26 SWG 248.00 255.80 7.8 514 4009 501 18 5/16 x 16-26 SWG 0.0 0 0.0 0 0 19 3/16 x 16-26 SW ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 25.4 mm x 16-26 SWG 33.9 504 17086 2136 9 Copper Scrap Copper scrap lying in factory loaded in Vehicle No HR-55P 4363 6203.525 384 2382154 297769 Total 6612.625 2585615 323202 S.No. Name of goods Description Shortage in stock (in Kgs) Rate/ kg Value Duty 1 Copper Pipe 1/2 x 23-24 SWG 1.4 511.03 715 89 2 x 22 SWG 0.3 506 152 19 3 x 16-21 SWG 18.2 481.03 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of the productions in the RG1 will not bring in the liability to confiscation under provision of the Central Excise Rules if there is no corresponding material of clandestine clearance also available. Unaccounted production goes in tandem with clandestine removal and evidence of both has to be present in a given case to avoid the charge to be determined on an assumption/presumption. Applying the tab for liability to confiscation in this case under Rule 173Q(1), we find the test to be not positive. The confiscation arrived is to be not upheld is to be set aside. In case of Vijayanand Textiles Milles 9P) Ltd. [2015 (3210 E.L.T. 231 (AP)] Hon ble High Court of Andhra Pradesh held as follows: 4. There is no dispute that the goods manufactured by the respondent are subjected to levy of central excise duty. It was not even alleged that the respondent has removed any manufactured goods, without payment of excise duty. The only allegation against the respondent is that it did not account for 28,781.67 LMtrs of cloth. The plea of the respondent was that the cloth was manufactured in the late hours of 12-8-1993 and early hours of 13-8-1993 and that when hardly before the oc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ugar. 4.6 Even in respect of the scrap, which was generated during the course of manufacture and was sent for recovery of metal to job workers for being further use in the process of manufacture of copper pipes, the allegations made cannot be upheld. Tribunal has in case of Annapurna Industries Pvt. Ltd. [2015 (324) E.L.T. 727 (T-Del)] held as follows: 4. We have considered the submissions from both the sides and perused the records. Coming first to the question of non-accountal of 780 kg of plastic scrap found in the premises of M/s. Annapurna Industries, there is no dispute that the same was not accounted for in the RG-1 Register. However, we are of the view that the appellant s plea that the same being intermediate product was meant for recycling and was exempted from duty under Notification No. 67/95-C.E. and for this reason, the same was not accounted for in the RG-1 Register is acceptable. Accordingly, we hold that the confiscation of 780 kg of Plastic Scrap under Rule 25(1) of Central Excise Rules, 2002 and imposition of penalty on M/s. Annapurna Industries on that account is not sustainable and has to be set aside. In case of Marigold Paints Pvt. L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on for confiscation of unaccounted exciseable goods under Rule 173Q(a), (b), (c) of erstwhile Central Excise Rules, 1944 and present Rule 25(a), (b), (c) of Central Excise Rules, 2002? 10. This question has squarely been answered by a Division Bench of this Court in Commissioner of Central Excise, Jalandhar. v. Indo German Fabs reported as 2007 (209) E.L.T. 184 (P H), wherein while relying on the judgement of Hon ble Supreme Court in Hindustan Steel Ltd. v. State of Orisa, reported as 1978 (2) E.L.T. (J159) (S.C.), it was held that element of mens rea is normally required to be shown for imposition of penalty. Same view was taken in The Commissioner of Income Tax, West Bengal v. Anwar AH, reported as AIR 1970 S.C. 1782. 11. In the present case, the Department has failed to prove the element of mens rea for imposition of penalty. It has been so held by the Commissioner as well as the Tribunal that no case was made out to impose penalty. The finding recorded that no case was made out for imposition of penalty is not shown in any manner to be perverse. 12. In view of the above, we find no merit in this appeal and the same is accordingly dismissed. 10.3 In t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of the goods. 12. As regards the sixth issue of seizure of goods valued at Rs. 88,800/- in the factory of the appellant on 22-101997, we find that there was no intent to evade duty as the goods were covered by regular challans of Sab-Chem Division and the goods remained the property of the appellants and since the duty paid by Sab-Chem Division would have been available as Modvat Credit to the appellant leading to a revenue neutral situation. We, therefore, set aside the confiscation of the seized goods in question. 4.7 Demand made in respect of shortages which are in range from 0.3 kgs to 23.60 kgs cannot be justified, without any evidence of any clandestine clearance or without any investigation also being made in this respect. In case of M.S.P. Steel Power Ltd. [2017 (357) E.L.T. 275 (Tri. - Del.)] Delhi bench has held as follows: 8. The said issue stands considered by the Commissioner (Appeals), who has observed that the statement of Shri Saibal Banerjee, Senior Manager (Accounts) had given an explanation to the purported aberration noticed during the course of investigation. For better appreciation, the reasoning adopted by the Commissioner (Appeals) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stine manner without leading any evidence on record. Though both the authorities have relied upon number of decisions in support of their submissions, note can be taken off on the recent decision of Hon ble Punjab Haryana High Court in the case of CCE, Ludhiana v. Anand Foundaries and Engineers [2016 (331) E.L.T. 340 (P H)], wherein it was held that the charges of clandestine removal based upon the alleged shortages of stock are not enough to up hold the charge of clandestine removal. Similarly in the case of CCE, Kanpur v. Minakshi Castings [2011 (274) E.L.T. 180 (Allahabad)], Hon ble Allahabad High Court rejected the Revenue s appeal by observing that the shortage in the stock, without evidence of clandestine removal cannot lead to finding of evasion of duty. Reference can be made to Tribunal s decision in the case of Sangemermer India Pvt. Ltd. v. CCE, Jaipur [2003 (158) E.L.T. 703 (Tri.-Del.)]. 9. Admittedly in the present case, apart from shortages, the investigators have not gone ahead to find out the evidences to corroborate the charge of clandestine removal with positive and tangible evidences. The Tribunal in the case of CCE v. Sai Iron (India) Ltd. [2005 (67 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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