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Commissioner of Central Excise & ST, Ludhiana Versus M/s. Amrit Soap Company

2015 (8) TMI 60 - CESTAT NEW DELHI

Discrepancy in Finished Goods Register (RG-1) - goods were found in excess of the recorded balance in their RG I register - unfinished / incomplete goods - Confiscation of goods - Imposition of redemption fine - Held that:- Findings of the adjudicating authority are at variance with what has been detailed in the said Hand Book. Further, the adjudicating authority has not explained in the impugned order as to why the samples were sent to Guru Nanak Dev University (GNDU), Amritsar, instead of any .....

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authority becomes inadmissible under the law.

Goods were found excess were not in complete finished condition as these goods were not packed and could not be entered in the statutory records. This fact has not been examined at the time of investigation. Therefore, the defence taken by the respondents is acceptable in the absence of corroborative evidence. Therefore, I do agree with the finding of the learned Commissioner (Appeals) that goods are not liable for confiscation. According .....

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, the same is upheld - Decided against Revenue. - Excise Appeal No. 58100 & 58366 of 2013 - Ex (SM) - Final Order Nos. A/ 51392-51393 /2015-Ex(SM) - Dated:- 22-4-2015 - Hon ble Mr Ashok Jindal, Member (Judicial),J. For the Appellants Shri R K Mishra, AR For the Respondent Shri P K Mittal, Advocate ORDER Per Ashok Jindal : Revenue is in appeals against the impugned order wherein the proceedings against the respondent have been dropped by setting aside the demand of duty along with interest and by .....

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ed and controlled by Shri Amrit Lal Gupta and his two sons namely, Shri Rajesh Gupta and Shri Chandan Gupta as partners. 3.1 As per the impugned order an intelligence was received in the office of Director General of Central Excise Intelligence (hereinafter referred to as DGCEI) indicated that the aforesaid units were evading payment of appropriate Central Excise Duty by way of clandestine production and clandestine removal of their finished products viz laundry soap. It had also been gathered b .....

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re conducted at the factory premises of M/s. ASC and M/s. ASC-II on 24.3.2009 by the DGCEI and documents /records deemed relevant for further investigation were seized under Panchnama drawn on the spot. Scrutiny of the Panchnama drawn at the time of search of the factory premises of M/s. ASC II on 24.3.2009 revealed that at the time of search Shri Mukesh Tiwari, Incharge and Shri Krishan Chand, Production Supervisor were present in the factory. The physical verification of the stocks of finished .....

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arch, 2009 and the stock position as physically verified was reconciled with the same. As a result thereof, stocks of various types of laundry soaps, toilet soaps and detergent powder valued at ₹ 60,97,401/- (MRP ₹ 79,42,340/-) involving Central Excise duty of ₹ 5,02,426/- were found in excess of the recorded balance in their RG I register and hence the detention thereof was converted into seizure vide letter dated 24.4.2009 in terms of provisions of Section 110 of Customs Act, .....

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pugned order wherein on being asked about the reason of difference in stock position, he could not give any plausible explanation and stated that they would check up the position and inform accordingly but in his subsequent statement dated 09.09.2009 he again could not give any explanation in this regard. Thus it appeared that the finished goods found over and above the recorded balance were not entered in their records with intent to clear the same without payment of Central Excise Duty leviabl .....

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ta in his statement dated 24.3.09 admitted the difference but could not give any plausible explanation / reason for the same. 3.5 Scrutiny of Panchnama drawn at the time of search of the factory premises of M/s. ASC on 24.3.2009 revealed that during the course of search, physical verification of the stocks lying in the factory premises was carried out and as a result thereof 8808 Kgs. of Nirol Soap valued at ₹ 2,90,664/- involving Central Excise duty of ₹ 23,951/- was found short of .....

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d order. 3.7 After the completion of investigation, a show cause notice was issued to M/s. ASC vide F. No. IV(6)LRU/INV/07/2009/1033 dated 09.09.2009 and another show cause notice was issued to M/s. ASC and M/s. ASC II vide F. No. IV(6) LRU/INV/07/2009/285 dated 29.03.2010. 4. The adjudicating authority decided both the show causes vide the impugned order wherein the adjduciating authority confirmed the demand of Central Excise duty amounting to ₹ 5,72,501/- against M/s. Amrit Soap Company .....

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A (1) alongwith interest under Section 11 AB of the Central Excise Act, 1944 imposed a penalty of ₹ 17,58,226/- against M/s. Amrit Soap Company (Unit II) Village Mandiani, Mullapur, Ludhiana under Section 11AC of the Central Excise Act, 1944 read with Rule 25 of the Central Excise Rule, 2002; confiscated the goods seized from M/s. Amrit Soap Company (Unit II), Village Mandiani, Mullapur, Ludhiana, valued at ₹ 60,99,718/- involving Central Excise Duty of ₹ 5,02,426/- under Rule .....

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ation order was set aside. Aggrieved from the said order, Revenue is before me. 3. Learned AR submits that in this matter, the learned Commissioner has erred in deciding the issue and not appreciating the facts on record. There was excess of finished goods found at the time of investigation and which has been admitted by the respondents. Therefore, the impugned order is required to be set aside on this ground alone as these goods were not entered into statutory records. Further, the buyer of the .....

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e found by the Inspecting team but the goods were not in finished condition. Therefore, they were not entered in the statutory records. Therefore, the allegation that there was excess of finished goods which were sought to be removed clandestinely is not sustainable and said fact has been appreciated by the learned Commissioner (Appeals) in detail. Therefore, allegation in the show cause notice qua confiscation of the goods and to propose redemption fine and penalty is not sustainable and the le .....

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Kgs soap has been clandestinely manufactured and removed. To counter this allegation, he submits that the raw material is only 840 Kg for the said batch and from the raw material of 840 Kg. how the goods of the weight of 1200 Kg, finished goods can be manufactured. Moreover, the respondent made a proposal to the adjudicating authority to appoint two independent officers in whose presence the respondent shall produce soap with same ingredient and same quantity of raw material as stated by Shri Ra .....

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adjudication. 5. Heard the parties. Considered the submissions. 6. In this case, mainly two issues are to be decided by me. (a) whether the goods found in excess at the time of investigation are liable for confiscation or not; and (b) whether shortage of raw material found during the course of investigation and thereafter allegation of procurement of raw material clandestinely and manufacturing thereof and clearance of finished goods without payment of duty is proved by the department or not. 7 .....

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er rule 25 of the Rules and Noticees are liable for penal action under 25 of the Rules for the same. Further, finished goods valued at ₹ 3,20.289/- involving Central Excise duty of ₹ 26,392/- were also found short. a. The issue to be decided in the instant case is whether the goods lying in the factory premises were liable to be confiscated. The other issue to be decided is whether the penalty is imposable for the goods said to be removed clandestinely. b. The said Rules 25 of Centra .....

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having applied for the registration certificate required under section 6 of the Act; or (d) contravenes any of the provisions of these rules or the notifications issued under these rules with intent to evade payment of duty, then, all such goods shall be liable to confiscation and the producer or manufacturer or registered person of the warehouse or a registered dealer, as the case may be, shall be liable to a penalty not exceeding the duty on the excisable goods in respect of which any contrav .....

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eaning of the expression account for in the said Rule is important to confiscate the goods. The expression account for in the said Rule is important to confiscate the goods. The expression account for was discussed by the Hon ble CESTAT in the case of Pepsi Foods vs. CCE [2002 (139) ELT 658 (CEGAT) as under: 10 .Even apart from the above observations of the? Tribunal regarding the requirement for mens rea, we feel that Rule 173Q(b) can not take in accounting failure simplicitor. This is clear fr .....

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e goods, manufactured by the assessee. In short, the disposal of the goods in accordance with legal provisions. Thus, sub-rule (b) of Rule 173Q relates only to cases where an assessee fails to explain that the goods have been dealt with according to law, and not to cases where there had been failure to make correct entries in account books. We find that this view has already been taken by a Single Bench of this Tribunal in the case or CCE, Hyderabad v. Continental Chemical [2001 (46) RLT 850]. T .....

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oods are manufactured, finished and packed by the assessee; that till the process of finishing, testing or packaging are carried out on the goods, the goods cannot be said to be fully manufactured. It is not clear from the impugned order that whether the said goods were fully finished or not and, therefore, as such their entry in the records not made cannot be held to be a contravention of any kind of any provision of law. I find that the adjudication authority has not returned any finding in th .....

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excise law. In view of the principle laid-down therein and other relevant decisions, processes incidental or ancillary to packing are to be included in the process of manufacture; manufacturers in the sense of bringing the goods into existence as these are known in the market, is not complete until the detergent powder is packed in suitable packs [refer Collector of Central Excise, Calcutta v. East End Paper Industries Ltd. 1989 (43) E.L.T. 201 (S.C.) = 1990 (186) ITR 105 (S.C.)]. The above said .....

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ition as these goods were not packed and could not be entered in the statutory records. This fact has not been examined at the time of investigation. Therefore, the defence taken by the respondents is acceptable in the absence of corroborative evidence. Therefore, I do agree with the finding of the learned Commissioner (Appeals) that goods are not liable for confiscation. Accordingly, the proposal of confiscation of goods is set aside. Consequently, penalty, redemption fine are not imposable on .....

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ers in loose form carried names of appellants or whether they contained the signatures of any of the partners of any of the appellants. I also find that on the basis of these papers four of the buyers were said to be identified as namely, M/s. Singla Traders, Gokul Road, Ludhiana, M/s. B R Trading Company, Gill Road, Ludhiana and M/s. Jindal Tradinbg Company, Behind ATI, Gill Road, Ludhiana and M/s. Singla Trading Co. Main Bazar, Ahmedgarh, Distt. Ludhiana. I find that statements of the concerne .....

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C and M/s. ASC II and also it is not clear at what value these items were received from the appellants. In the absence of these vital ingredients it is not possible to quantify and link the alleged clandestine removal of goods to the appellants. Further, in para 1.11 it is mentioned that said loose papers contained names of the buyers in short form and Shri Chandan Gupta could identify all of them. But is not explained why only these four were picked up and rest were left for conducting further .....

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payment of Central Excise duty, the adjudicating authority has held in para 4.7 of the impugned order as under:- I further observe that on scrutiny of the records of the Noticee by the DGCEI, it was noticed that prior to March, 2006, when laundry soap was exempted from duty, the Noticee had been using various oils, such as Castor Oil, Crude Palm Oil, Palm Fatty Oil and Rice Bran Oil Fatty Acid in the manufacture of laundry soap. However, from March, 2006onwards i.e. immediately after imposition .....

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Delhi Titre is the setting point of fatty acids contained in an oil i.e. it is the temperature, in degree Celsius, at which an oil/ fat solidifies. The higher the Titre , the harder is the fat. The physical hardness of soap depends upon the type of oil used. In order to obtain right hardness. It is common to use a blend of hard and soft oils for soap making. While palm fatty acid oil, Tallow, and grease are hard fats and rice bran oil, castor oil, corn oil coconut oil groundnut oil cotton seed o .....

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lows: i) Palm Oil = 40.47 degree Celsius ii) Rice Bran Oil = 27.29 degree Celsius iii) Castor Oil =3-5 degree Celsius Since the Noticee in their records were claiming to manufacture laundry soap by using only Palm Fatty Acid Oil having titre value range of 40-47 degree Celsius, a representative sample of their laundry soap was got tested from the department of Chemistry, Guru Nank Dev University (GNDU), Amritsar, to ascertain the titre value of the soap manufactured by the Noticee, , GNDU, Amrit .....

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ing regarding manufacture of laundry soaps only on the titre value of the oils used. From the same Herbal Soaps and Detergent Handbook which the adjudicating authority has referred to, I find the following entries at Page 31-32 Formulation of oil blewnds for soaps While formulating oil blends for Laundry or toilet soaps the following important criteria should be considered:- 1. Choice of oils and fats available for making soaps. 2. Iodine value, titre and fatty acid composition of constituents o .....

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stability of the resulting soap. Titre gives similar information except in the case of hydrogenated castor oil, where the Titre value is high but the soap may not be as hard as is dictated by this value. Hydroxy acid is a major component of castor oil, unlike in most other oils, and it behaves differently. This is why castor oil is processed differently prior to use. Earlier, the INS factory (i.e. saponification value minus iodine value) and Titre value of oils were used as criteria for formula .....

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own. It is however possible to arrive at average value for each oil by carrying out analysis on a number of oils. Sometimes GLC does not provide the entire composition e.g. isomers of oleic acid affect the quality of the soap. The determination of trans isomer of oleic acid is carried out by using on infra-red spectrophotometer. Similarly, it is important to know the hydroxyl and actostearic acid content of processed castor oil since these also affect the processing and quality of the soap. Chem .....

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the test were qualified to conduct the test and that whether their test report was acceptable under law and by what authority of law. It is also not brought on record what tests were carried out by the said person/ persons. It is also not brought out on record how the test report conducted on laundry soaps manufactured by the appellants. Thus the test report relied upon by the adjudicating authority becomes inadmissible under the law. i. I find that the adjudicating authority has calculated the .....

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