TMI Blog1999 (4) TMI 386X X X X Extracts X X X X X X X X Extracts X X X X ..... ds) and scraps were being maintained by them. The impugned Order confirming the demand of duty is based on a comparison of entries made in the said Daily Production Account with the entries made in the RG 1 register of the appellant company. It has been alleged against the appellants that 26,914 number of tyres of different varieties have not been accounted by them in their RG 1 register and have been manufactured and cleared clandestinely without payment of duty. During the investigation period, the statements of various persons of the appellant company were recorded. 2. In his statement dated 3-2-1995, Shri Nani Gopal Das, Production Assistant of the appellant company, deposed that he was maintaining the said record on the basis of the reports generated by the Shift-in-Charge and Daily Production Register was being maintained on the basis of Tyre Curing Shift Report for the three shifts received separately from the Shitt-in-Charge. The Tyre Curing Shift Reports are prepared on the basis of number of tyres cured in each shift and such report is submitted to the Production Superintendent on daily basis. The statement of Shri Probodh Narayan Jha, Production Superintendent was also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h Rules 209 and 9(2) of the Central Excise Rules, 1944. Modvat credit reversal of duty of Rs. 1,52,208.00 was confirmed. Seizure of 55 number of tyres was vacated and no duty was confirmed on the same. However, for keeping the duty paid tyres in a godown not approved by the Department, a penalty of Rs. 1.00 lakh was imposed and another penalty of Rs. 1,52,208.00 was imposed on them for taking Modvat credit in respect of 36MT, of Carbon Black kept outside their factory. The said Carbon Black was also held liable to confiscation with a redemption fine of Rs. 5.00 lakhs. Apart from this, penalty of Rs. 2.00 lakhs each was imposed on Shri Deepak Tandon, Vice President and Shri S.C. Sood, Senior Manager, under Rule 209A of the Central Excise Rules, 1944. The said Order of the Commissioner is impugned before us. 5. Shri J.S. Agrawal, learned Advocate along with Shri J.M. Daga, learned Advocate appeared on behalf of the appellants. Shri Agrawal submitted that the findings arrived at by the Commissioner are on the sole basis of comparison of the entries made in their so-called Daily Production Register with the entries made in the RG 1 register. He submitted that though the register is c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g. The number of peaks also represent the number of tyres cured. This circular graph gets completed in 24 hours and taken out every day in the morning at 6 A.M. He submitted that this system of circular graph recording is in accordance with the directions issued by the Central Board of Excise and Customs. He drew attention to the Circular No. 141/87, dated 31-8-1987 issued by the Cochin Collectorate circulating thereby the Board s letter dated 12-8-1987 issued from F. No. 261/40/6/87. He also submitted that they had been following the said instructions for recording the number of tyres moulded on each moulded machine on a graphic summary in the form of a Circular Drawing. He also drew our attention to the said Circular Graphic Summary maintained by them, which had appeared at pages 54 to 57 as samples and submitted that the peaks of the said summary represent the number of tyres moulded in a day. He submitted that the graphic summary record maintained by them had been accepted by the Central Excise Officers and was not held to be bogus or incorrect by them. In the absence of any doubt as regards the said moulded tyres, the allegation of clandestine manufacture and clearance of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibed the stage for accountal of production in RG 1 register. In the said Circular the stage in respect of tyres has been laid down as - As soon as they are found fit for marketing and passed by the technical hand. He also relied upon the Board s instructions dated 23-7-1983 issued vide F. No. 261/16/79 wherein after taking into consideration the representations made by the tyre-manufacturers that it was not possible to make entries in RG 1 register after the tyre comes out of the mould, the accountal stage in RG 1 was prescribed after all the tests and quality control checks were over. He submitted that the Commissioner had proceeded to confirm the demand as if the tyre was completely manufactured as soon as the same was taken out of the mould. He also submitted that as the RG 1 stage has been prescribed by the Board, i.e. after passing of all the tests and quality control, taking of entries in curing the register, into consideration by treating the same as RG 1 stage by the Commissioner, was against the Board s own instructions. He also submitted that the Apex Court has now laid down that the Department cannot be allowed to plead against its own Circulars and Instructions. He, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ters cannot be compared on month to month basis inasmuch as the cured tyres are not immediately entered in the RG 1 records. The cumulative entry for the entire period, if taken into account, would show only the difference of 9432 tyres. The said difference is explained by them that 6740 number of tyres were scrapped as reflected in pages 195 and 196 of the paper-book; 582 tyres were for in-house testing taken as samples, as shown at page 197 of the paper-book; and the remaining 2110 tyres were lying on the floor after curing the same for further processes. As such, submitted the learned Advocate, that each and every tyre had been explained by them and the factum of entering of more tyres in RG 1 register than the number of tyres cured in that particular month, strengthens their plea that the entries in RG 1 register are not made on the basis of entries in curing register. 10. Shri Agrawal also argued vehemently on the point of limitation and submitted that their factory was under physical control up to 30-11-1993 and every clearance was made under the signature of the Central Excise Officer posted in their factory. As such, it was not only impossible but impractical for them to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .L.T. A76 (S.C.). 13. As regards the storing of the inputs outside the factory premises, he relied upon the Tribunal s decision in the case of M/s. Wadilal v. Collector of Central Excise reported in 1998 (99) E.L.T. 513 (Tribunal) and departmental instructions reported in 1998 (98) E.L.T. T-4. 14. As regards the personal penalty on the Vice-President and Senior Manager under the provisions of Rule 209A of the Central Excise Rules, 1944, Shri Agrawal prayed for setting aside the same inasmuch as the factum of clandestine removal had not been proved beyond doubt by the Department and there was no intention to evade payment of duty. He submitted that as there had been no seizure of any tyre or any documents indicating such removal, penalty was not imposable. He relied upon the following decisions :- (i) 1997 (96) E.L.T. 369 (Tribunal) in the case of M/s. Eastern Bharat Mills v. Collector of Central Excise; (ii) 1997 (89) E.L.T. 151 (Tribunal) in the case of Silkon Silk Mills (Exports) Ltd. v. Commissioner of Customs, Bombay - II (iii) 1997 (89) E.L.T. 212 (Tribunal) in the case of DCW Ltd. v. Collector of Central Excise, Madurai. 15. In view of his foregoing submissio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the seizure of 55 number of tyres cleared on payment of duty under an invoice in favour of the I.O.C., Calcutta, by observing that the duty on the same was rightly paid, however, keeping the duty paid goods in their outside godown is against the prescribed procedure. The goods should have been transported to the consignee and the assessee should not have kept these duty paid tyres in their godown situated away from their factory at a distance of only 2/3 km. As such, he justified the imposition of penalty. 18. As regards the imposition of penalty in respect of 36 M.T. of Carbon Black, he submitted that though the appellants have already reversed the Modvat credit of duty of Rs. 1,52,208.00 taken on the said quantity which was kept outside their factory, the adjudicating authority has justifiably imposed penalty of Rs. 1,52,208.00 under Rule 57-I(4) read with Rule 173Q of Central Excise Rules, 1944 for taking unauthorised Modvat credit on the said quantity of inputs. Redemption fine of Rs. 5.00 lakhs imposed by the adjudicating authority in lieu of confiscation of the said 36 M.T. of Carbon Black is also justified inasmuch as the appellants took the Credit without bringing the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ulded in a day are recorded in the form of a graphic summary in the shape of circular drawing and such circular graph is completed in 24 hours. The peaks on the circular graph represents the number of tyres moulded. This circular graphic summary is being maintained by the appellants in accordance with the Board s instructions circulated through their F.No. 261/40/6/87 dated 12-8-1987 which have been strongly relied upon by the appellants. It is for the sake of ready reference that we are reproducing the same below :- I am directed to refer to Board s letter F.No. 261/40/l/87-CX. 8, dated 6-4-1987 on the above subject and to say that in supersession of all previous instructions, the enclosed proforma is prescribed for maintenance of supplementary records of tyres and tubes moulded. It may be pointed out that the enclosed proforma visualises the accounting of tyres immediately after their being moulded on moulding machine and all subsequent movements on each moulding machine is recorded on a graphic summary in form of a circular drawing. The circular graph is complete in 24 hours. The peaks on the circular of graph represents the number of tyres moulded. It is, therefore, emphasis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g, extra rubber and flesh on the tyres have to be removed and the same have to be rotated on the trimming machine and subsequently inspected for minor defects and have to pass through the strict test of the Quality Control Department of the appellant company, has not been disputed by the adjudicating authority, though specifically pleaded by the appellants before him. As the Circulars of the Board clearly lay down that only those tyres which pass through the quality checks and are found fit for marketing, are to be entered in RG 1 stage, it was not proper for the adjudicating authority to brush aside the said Circulars which were binding on him as per the law laid down by the Hon ble Supreme Court. The objection of the learned Advocate for the Revenue that all the columns in RG 1 were not being filled by them and entries were not being made under the column - Finished Store Room - may reflect on some procedural lapse on part of the appellant company, but can certainly have no connection with the charge of clandestine removal of the final product. 22. It has to be borne in mind that the fact of clandestine removal has to be proved and is not a matter of inference. The findings c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in this manner from floor shop, through the medium and coverage of Finished Goods Transfer Challans and the RG 1 entries as regards the production quantities delivered and stock. They had also contended before the adjudicating authority that it was because of these documented data that during all stock-takings conducted by the Central Excise Authorities periodically, that there has been no discrepancy noticed in this regard. Such a submission made by the appellants, has not been rebutted by the Commissioner. 23. In these circumstances, we find it difficult to sustain the charge of clandestine removal against the appellant company. 24. We also take note of the fact that apart from making of the case on the sole basis of entries in the curing register there is no other evidence on record to corroborate the charge of clandestine removal. The appellants have categorically stated before the adjudicating authority in their reply to show cause notice that no discrepancy whatsoever, was ever found by the Officers in the raw-material required for the manufacture of tyres. The main raw-material for the manufacture of tyres is industrial/synthetic rubber. The Department has not pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esent on the shop floor. We would like to reproduce the relevant portions of the statements of some of the persons recorded by the Officers :- Statement dated 22-6-1995 given by Shri Deepak Tandon :- ......I also understand that Central Excise Authorities have considered only some months for alleging the differences. This as a practice is incorrect since the Curing Department is only one of the processes. To reconcile the stock, one has to consider complete period of time and not pick up at random some months..... Statement dated 14-3-1995 of Shri S.C. Sood :- ...... In fact, at that stage, in the curing section, the tyres were not even in the finished condition. and Entries in RG 1 register are made by us only after the tyres are fully manufactured and all finishing quality check operations are completed. Curing state is only an in-process stage and at that stage, the goods are never entered in RG 1 register. Statement dated 3-2-1995 of Shri P.N. Jha :- Curing means moulding the green tyres and giving a shape to the tyre. Hence whatever tyres of green tyres come to my section a shape is given to it as per requirement. and A cured tyre is not a completely manuf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch were still on-line stage and were not ripe for RG 1 stage, cannot be called as excisable goods requiring their destruction under the Departmental supervision. The letter dated 1-11-1997 of the Director General of Automotive Manufacturers Association relied upon by the appellants giving details of procedure followed by Tyre Industries for scrapping of cured tyres, also shows the procedure followed by the industries that no permission under Rule 49 of Central Excise Rules, 1944 is being taken for scrapping of cured tyres. Rightly so, because such tyres cannot be said to have reached the marketable stage, and to have been completed for their entry in RG 1 register and as long as the appellants reflect their scrapping in the records prior to entry in RG 1, no contravention can be said to have been committed by them. Even otherwise, we find that the adjudicating authority has not doubted the factum of scrapping of these tyres and has observed that the benefit of Notification No. 76/86-C.E., dated 10-2-1986 would have been applicable to scrapped tyres and scrapped tubes, provided the same were first cleared in RG 1 and then permission taken from the Commissioner in terms of Rule 49. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on for imposition of penalties upon Shri Deepak Tandon and Shri S.C. Sood under Rule 209A of the Central Excise Rules, 1944. Accordingly, the same are also set aside and their appeals allowed. 28. The impugned Order has also confirmed the reversal of Rs. 1,52,208.00 taken as Modvat credit by the appellants on 36 M.T. of Carbon Black. The said Modvat credit was availed by the appellants on the basis of the Modvatable documents, but without bringing the goods into their factory premises. The explanation of the appellants that the same was an unintended technical lapse on the part of clerk concerned inasmuch as he made the entries in RG 23A register on the basis of the documents handed over to him even though the said 36 M.T. of Carbon Black were stored by them at the outside godown because of the presence of already huge quantity of 62653.2 M.T. of Carbon Black in their factory, is not acceptable, inasmuch as the appellants were not entitled to take the said credit without bringing the goods into their factory. Accordingly, the Modvat reversal entry of Rs. 1,52,208.00 is confirmed. However, we find that the imposition of penalty of Rs. 1,52,208.00 under Rule 57-I(4) is not warrante ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the godown after having been cleared on payment of duty because a Road Permit was required to be sent by the consignee after obtaining the same from the local Sales Tax Authority in West Bengal. Accordingly, we set aside the imposition of personal penalty of Rs. 1.00 lakh on M/s. Birla Tyres. 30. In view of our foregoing discussions, we set aside the impugned Order and allow all the appeals except the confirmed reversal entry of Rs. 1,52,208.00 in respect of 36 M.T. of Carbon Black. Sd/- (Archana Wadhwa) Member (J) 31. [Order per : P.C. Jain, Member (T)]. - I have the benefit of perusing the order proposed by my ld. sister Mrs. Archana Wadhwa, Judicial Member. While agreeing respectfully, with her, I would like to add the following to the order proposed by her. 32. I observe that the show cause notice alleged clandestine manufacture and removal of goods (tyres) without payment of duty for the period August, 1992 to March, 1994 at the level of 91,663 tyres. 33. The adjudicating officer, on the well-merited contentions of the appellants herein before it to the effect that the show cause notice has taken a unilateral approach of ignoring those months where productio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... marketable need to be shown in this column. 37. Adjudicating authority has again committed an error in construing Rule 53 and the record of production (RG 1) prescribed thereunder as a record of production of goods whether these are marketable or not. I am not disputing the Boards power (and that is not a question before us) to prescribe the record of production of any excisable goods under Rule 53 read with Rule 173G at a stage prior to the marketable stage of any excisable goods for any particular excisable commodity, but it has to be prescribed specifically. No such prescription has been made by the Board in respect of the commodity tyres . The Board has very carefully described its prescription of a proforma in its circular of 1987 as a supplementary record of tyres/tubes at the moulding stage . 38. In view of the foregoing, and as discussed in detail by the ld. Judicial Member, RG 1 has been correctly maintained by the appellants on the basis of Finished Goods Transfer Challans. No charge of suppression of production and consequent clandestine clearance can be sustained against them. 39. Similarly, reliance made by the ld. Adjudicating authority on Rule 49 for taking ..... X X X X Extracts X X X X X X X X Extracts X X X X
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