TMI Blog2014 (4) TMI 221X X X X Extracts X X X X X X X X Extracts X X X X ..... ided in favour of assessee. Clearances of raw materials removed from Sab Chem Division under the cover of challans - Whether duty on raw materials removed from Sab Chem Division of appellant, under the cover of challans maintained by the appellant, could be demanded from the Sab Chem Division of the appellant - Held that:- During the material period, the Sub Chem Division was engaged in the manufacture of excisable goods on job work basis for M/s Berger Paints Ltd, which was cleared on payment of full rate of duty after availing MODVAT Credit of duty paid on inputs. While it is true that excise duty cannot be demanded on removal of raw materials on which no MODVAT Credit had been taken, but when MODVAT Credit was availed by Sab Chem Division on raw materials/ inputs received from Berger Paints Ltd, a part of which (involving duty of ₹ 2,21,134/- as accepted by the appellant) was subsequently returned to Berger Paints Ltd, Sab Chem Division was required to pay duty on the such returned inputs/ raw materials at the time of removal from their factory in terms of the provisions contained in Rule 57F of the erstwhile Central Excise Rules, 1944. It is also evident from appeal re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted 19.07.2006, passed by the Commissioner of Central Excise Customs, Vadodra-I. As the facts leading to all these appeals are the same, therefore these appeals are being disposed of by this common order. 2. M/s Marigold Paints Private Limited, the main appellant filing Appeal No. E/ 59/ 2006-DB, are engaged in the manufacture of paints, varnishes, resins, thinners falling under Chapter 32 and 39 of the Schedule to the Central Excise Tariff Act, 1985. M/s Sab Chemicals (subsequently known as Sab-Chem Division of the appellant) was taken over by the appellant with effect from 31.12.1995. M/s Marigold Coating Private Limited (at present Known as Resin Division of the appellant), M/s Rosalee Paints Private Limited, M/s Rosalee Products Private Limited (at present known as Paints Division of the appellant), and M/s Rosalee Coatings Private Limited amalgamated with the appellant company on 22.10.1997. The officers of the Central Excise Department seized records from the premises of the appellant, and finally issued show cause notice on 16.04.1998. The adjudicating authority, vide his impugned Order on Original : (a) Confirmed demand of central excise duty of Rs. 25, 30,310/- alo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agreement between the companies, the amalgamation is effective. Further, amalgamation is also not effective unless the conditions in the order of the Court are not fulfilled. In the instant case, he argued that the order of amalgamation was passed by the Hon ble High Court on 01.10.1997 in following terms: 5. That the transferor company do within 30 days after the date of this order cause a certified copy of this order to be delivered to the Registrar of Companies, Ahmedabad, Gujarat for registration and on such certified copy being so delivered the transferor company shall be dissolved and the Registrar of Companies shall place all the documents relating to transferor companies and registered with him on the file kept by him in relation to the transferee company and the files relating to said companies shall be consolidated accordingly. Learned Advocate thus argued that since the transferor company M/s Marigold Coatings P Ltd submitted the certified copy of the court s order dated 01.10.1997 with the Registrar of Companies on 22.10.1997, 22.10.1997 is the relevant date on which amalgamation became effective and the transferor company (Marigold Coatings P Ltd) stood ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd of Rs. 2,37,220/- was not sustainable as the removals pertained to removal of raw materials returned by Sab Chem to the appellant, which were received by Sab Chem under Rule 57F (3) for the manufacture of excisable goods for the appellant on job work basis without availing MODVAT Credit. It was his case that in any case duty could not be demanded on raw materials on which no credit is taken and thus the demand on raw materials is contrary to law and hence not sustainable. He submitted that without prejudice to submissions above demand of duty on raw materials for the period up to 16.10.1997 is barred by limitation. (iv) With regard to demand of duty of Rs. 7,81,593/-, the Ld. Advocate argued that the entire demand of duty against the appellant is based on the records maintained by them in their normal course of business. The basic record, on which proceedings were initiated, are serially numbered Challans, which are bound in triplicate books containing details of all materials, whether raw materials or finished goods, sent out from various divisions of the appellant since inception. The fact that the Challans are maintained for all type of removals would indicate that the app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goods were either not fully manufactured or were not in a condition in which they are marketed, and that the same were lying within the factory premises and there is no evidence on record to show that there was any attempt to remove the same clandestinely without payment of duty. He argued, referring to the decision of the Tribunal in the matter of K. R. C. D. Industries Private Limited Vs. CCE [2006 (193) ELT 566 (Tribunal)], that the unaccounted production goes in tandem with clandestine removal and evidence of both has to be present in a given case. It is well settled legal position that confiscation is not attracted by mere non accountal of goods when there is no evidence that such non accountal of goods still in the factory was with intent to evade payment of duty. Learned Advocate relied upon the following case laws in support of his arguments: (1) Southern Steels Ltd Vs. UOI - [1979 (4) ELT J 402 (AP)]; (2) Bhillai Conductors (P) Ltd Vs. CCE - [2000 (125) ELT 781 (Tribunal)]; (3) Koch Rajes C. D. Industries Pvt. Limited Vs. Commissioner of Central Excise, Mumbai-IV - [2006 (193) ELT 566 (Tri. Mumbai); (4) Commissioner of Central E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erstwhile Central Excise Rules, 1944? (5) Whether the goods, valued at Rs. 10, 83, 459/-, allegedly in fully manufactured condition, lying within the factory of Sab Chem Division on 22.10.1997 but not entered in RG-1 Register, could be confiscated under Rule 173 Q of the erstwhile Central Excise Rules, 1944? (6) Whether the goods, valued at Rs. 88, 800/-, removed from the factory of Sub Chem Division of the appellant under the cover of challan dated 22.10.1997, and seized on 22.10.1997 at the other unit of the appellant on account of non-issue of corresponding central excise invoice on 22.10.1997 were liable to confiscation? 6. With respect to issue relating to the effective date of amalgamation we find that the Honble High Court of Patna, while deciding a case under the Industrial Disputes Act, 1947, cited by the Ld. Advocate, has held in the case of Tata Iron and Steel Company Limited Vs. Presiding Officer others (supra), as under: 16. From perusal of Clause 15 it is abundantly clear that although the scheme of amalgamation would be operative from the appointed date; i.e. April 1, 1983 but it shall take effect from the last of the date upon which certifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duty of Rs. 7,44,510/- has been demanded on clearances of raw materials removed from Sab Chem Division under the cover of challans. During the material period, the Sub Chem Division was engaged in the manufacture of excisable goods on job work basis for M/s Berger Paints Ltd, which was cleared on payment of full rate of duty after availing MODVAT Credit of duty paid on inputs. While it is true that excise duty cannot be demanded on removal of raw materials on which no MODVAT Credit had been taken, but when MODVAT Credit was availed by Sab Chem Division on raw materials/ inputs received from Berger Paints Ltd, a part of which (involving duty of Rs. 2,21,134/- as accepted by the appellant) was subsequently returned to Berger Paints Ltd, Sab Chem Division was required to pay duty on the such returned inputs/ raw materials at the time of removal from their factory in terms of the provisions contained in Rule 57F of the erstwhile Central Excise Rules, 1944. It is also evident from appeal records that the Sab Chem Division was also manufacturing excisable goods for the main appellant out of raw materials supplied by them without availing MODVAT Credit. We, therefore, find that out of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Ltd in terms of Rule 57F of erstwhile Central Excise Rules, 1944 had been raised for recovering the increase in job charges on account of increase in price of fuel, electricity etc., no duty was payable by the Sab Chem Division on the differential job charges so received in as much as liability to pay excise duty on goods, already cleared under Rule 57F was that of Berger Paints Limited on the basis of normal price under Section 4. Therefore, demand of duty of Rs. 49,059/- is not sustainable and hence it is set aside. 10. On the fifth issue raised Para 5(5) above, we find that in the matter of Koch Rajes C. D. Industries Pvt. Limited Vs. Commissioner of Central Excise, Mumbai-IV - [2006 (193) ELT 566 (Tri. Mumbai), cited by the Advocate for the appellant, the CESTAT held in Para 3 (b) of the decision as under: (b) The law on confiscation of goods, in the factory and not entered in RG -1 production record is well settled. From the following decisions of the Bombay Andhra Pradesh High Courts of this Tribunal. (i) Southern Steels Ltd. v. U.O.I. - 1979 (4) E.L.T. (J 402) (A.P.) (ii) Kirloskar Brothers - 1988 (34) E.L.T. 30 (Bom.) (iii) Nalanda Tobacco - 1997 (91) E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Revenue that the respondent had cleared the goods unaccounted and the goods were kept for clandestine clearance. In the present case, even if the goods had not been entered in the RG-1 register, yet the same cannot lead to the conclusion that the goods were meant for clandestine removal. Both the Commissioner as well as the Tribunal have returned a concurrent finding of fact that there was no mens rea on part of the respondent to clandestinely remove the goods. 9. The appellant had formulated the following question of law for adjudication by this Court :- Whether mens-rea is a pre-condition 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 Orrisa, reported as 1978 (2) E.L.T. (J159) (S.C.), it was held that element of mens rea is normally requi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also the goods were lying within the appellants factory. There was no evidence on record to show that there was any attempt to remove those goods clandestinely without payment of duty. Appellant has given reasons as to why according to them the entries are required to be made in the statutory records only when goods are in a condition of finishing as available in the market. In view of the above decisions on the issue, we hold that the goods in question were not liable to confiscation under Rule 173Q of the erstwhile Central Excise Rules 1944. Accordingly, we set aside the confiscation 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 22.10.1997, 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. 13. However, penalty of Rs. 2,000/-, imposed upon the appellant under Rule 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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