COIMBATORE POPULAR SPINNING Vs. CCE

JUDGEMENT

(1.) THE appellants are manufacturers of cotton yarn on cones. Officers of Central Excise who visited their factory on 14.2.2003 and conducted scrutiny of accounts and physical stock of cotton yarn, found shortages in respect of yarns of certain counts and excess in respect of yarns of some other counts vis -a -vis balances of stock entered in RG -I Register. The factory Manager admitted that the shortage was due to clandestine removal and that the excess stock was due to improper maintenance of RG -I Register. The officers recovered a small notebook, which contained the details of stock as well as sale of cotton yarn from factory and from godown. The godown at Palladam was also visited and 379 bags of cotton yarn was found there. The factory Manager admitted that this quantity of cotton yarn had been clandestinely removed from the factory godown. The excess stock of cotton yarn was seized by the officers. The appellants paid duty of Rs. 4,98,599/ -, which was worked out as payable on the cotton yarn admittedly removed without payment of duty. Subsequently, the Department issued a show -cause notice for confiscation of the excess stock of yarn and for imposition of penalty on the appellants. The proposals in the notice were contested. The original authority, in adjudication of the dispute, confirmed against the party demand of a total amount of duty of Rs. 4,98,599/ -and confiscated the entire quantity of seized cotton yarn with option for redemption on payment of a fine of Rs. one lakh. It also imposed a penalty of Rs. 4,98,599/ - on the party under Section 11AC of the Central Excise Act, besides demanding interest on the aforesaid amount of duty. In an appeal filed by the party against the order of the original authority, learned Commissioner (Appeals) ordered deduction of duty from sale price for the determination of assessable value of the goods found to have been clandestinely sold by the party, thereby reducing their duty liability. In all other respects, the order of the original authority was sustained. The present appeal is against the order of the appellate authority. This appeal is against demand of duty of Rs. 4,56,592/ - [quantified in terms of Section 4(4)(d)(ii) of the Central Excise Act as directed by the Commissioner (Appeals)], redemption fine of Rs. one lakh and penalty of Rs. 4,56,592/ -.

(2.) LEARNED Counsel submitted that, as the appellants were discharging duty liability on a monthly basis, they were not liable to pay duty on the goods removed from their factory between 1.2.2003 and 14.2.2003 [date of visit by officers of Central Excise], at the time of clearance of the goods. They had time upto the 5th day of the next month for payment of duty on such goods. In any case, the entire amount of duty was paid by them prior to issuance of the show -cause notice and, therefore, they were not liable to be penalized under Section 11AC of the Central Excise Act. In this connection, reliance was placed on the Tribunal's Larger Bench decision in CCE v. Machine Montell (I) Ltd. . Learned Counsel also challenged the fine imposed on the appellants. Learned SDR submitted that, admittedly, the appellants had not maintained their RG -I Register properly between 1.2.3003 and 14.2.2003, which was an offence warranting confiscation of the unaccounted goods and penalty on the offender. According to learned SDR, the fine of Rs. one lakh imposed on the appellants in lieu of confiscation of such goods was reasonable.

(3.) AFTER giving careful consideration to the submission, I find that there is no dispute with regard to the duty liability of the appellants. It is also not in dispute that the entire amount of duty was paid prior to the issuance of the show -cause notice. In the circumstances, no penalty was imposable on the party under Section 11AC, nor was any interest chargeable on the duty amount under Section 11AB of the Act vide Machine Montell (I) Ltd. (supra). Hence the penalty imposed on the appellants under Section 11AC and the demand of interest on duty, raised under Section 11AB, are vacated. As regards redemption fine, I find force in the challenge against its quantum. The authorities below ought to have exercised their discretion under Section 34 of the Act in a justice -oriented manner in the facts and circumstances of the case. I am of the view that a fine of Rs. 50,000/ - would have been reasonable in this case. Accordingly, the quantum of fine gets reduced to Rs. 50,000/ - (Rupees fifty thousand only).