SHINGAR LAMPS PVT. LTD. Vs. CCE

JUDGEMENT

(1.) THE appellants are aggrieved by the orders of the authorities below confirming a demand of duty of Rs. 2,10,549.80 against them under Rule 9(2) of the Central Excise Rules 1944 read with Section 11A of the Central Excise Act and imposing on them a penalty of Rs. 1 lakh under Rule 173Q. Examined the records and heard both sides. The department's case against the appellants is based on certain private records which were resumed by officers of Central Excise from their factory on 31.8.1991. According to the department, the difference between the quantities of production shown in the private record (Daily Production Report) and the RG -1 register for the period 1.4.1990 to 30.8.1991 was clandestine production carried out with intent for clandestine removal. Therefore, by show cause notice dated 27.3.1995 invoking the extended period of limitation under the proviso to Section 11A(1) of the Act, the department demanded duty on a quantity of over 1 lakh pieces of Fluorescent Tube Lights (FTL) which was found to be the difference in quantity between the private record and the statutory register. They also proposed to impose penalty on the party. The proposals were contested. The Deputy Commissioner of Central Excise who adjudicated the dispute confirmed the demand of duty and imposed a penalty of Rs. 1 lakh, after recording a finding that the aforesaid quantity of over 1 lakh pieces of FTL were clandestinely manufactured and cleared without payment of duty and further that the appellants suppressed the factum of production before the department. This decision of the adjudicating authority was upheld by the Commissioner (Appeals) in the appeal preferred by the aggrieved party. Hence the present appeal.

(2.) LD . counsel Ms. Reena Khair for the appellants submits that the entire case of the department is based on certain entries made in the private record maintained by the appellants during the material period. She submits that, apart from such entries, no evidence whatsoever is available on record to support a conclusion that whatever difference in quantity was noted between the private record and the statutory record had been clandestinely manufactured and removed without payment of duty by the assessee. On the date on which the officers visited the appellant's factory, the actual physical stock was found to tally with the entry in the RG -1. Officers did not find any evidence like excess consumption of raw materials or of electricity disproportionate to those consumed for the manufacture of the quantities of product entered in the RG -1. Ld. counsel further submits that, without any positive evidence of production in excess of what was entered in the RG -1, it was not open, in law, to the Commissioner to infer that there was clandestine production on the basis of the difference of quantities shown in the private and statutory records. She also submits that in the case of Shakti Chemical Industries v. CCE [ : 1995 (76) ELT 410] cited before the Commissioner (Appeals), it was held on a similar set of facts that, in the absence of other evidence, it was not open to the departmental authorities to find clandestine removal only on the basis of a private note book resumed from the assessee's premises. The decision was wrongly distinguished by the Commissioner (Appeals). Ld. counsel further submits that the lower appellate authority has not found on the part of the assessee any intent to evade payment of duty and, therefore, it has erred in upholding the demand of duty under the proviso to Section 11A(1) of the Act. Ld. counsel has also relied on the Tribunal's decision in Saraswati Engineering Pvt. Ltd. v. CCE, Kanpur [ : 1997 (90) ELT 396] in support of her contention that there could be no finding of clandestine removal of goods and, for that matter, no confiscation or penalty, without positive proof. Ld. counsel has explained the entries made in the private record on the basis of certain provisions contained in the Central Excise Law Guide. Insofar as FTL is concerned, the Law Guide says that the accounting of the product in RG -1 should be made after the final test before packing and further that the bulbs which do not pass the final test are rejected and destroyed and only the caps are recovered. Counsel submits that the quantities shown in the Daily Production Report were those of the bulbs at the testing (pre RG -1) stage and the same had nothing to do with the quantities recorded in the RG -1. Counsel submits that this factual position was not appreciated by any of the authorities below. She, therefore, prays for setting aside the impugned order.

(3.) I have examined the submissions. The basis of the demand of duty is Annexure -A to the show -cause notice, which provides the quantities of FTL recorded in the appellants' Daily Production Report and those recorded in the RG -1 for the material period. The quantity shown in the private record for 30.8.1991 is 1575 pieces of FTL whereas that shown in the RG -1 for the said date is 200 pieces of FTL. The difference of 1375 is, according to the department, unaccounted and clandestine production of FTL on that day. Balbir Singh has given an explanation for this difference relating to 30.8.1991. I am unable to apply this explanation to the rest of the period, in the absence of any query having been put to the party by the Central Excise Officers in respect of such period and in the absence Of any independent evidence to justify such application. Apart from this, I find that the sole basis of the finding of the authorities below that the assessee indulged in clandestine production and clearance, without payment of duty, of over 1 lakh pieces of FTL is the private record referred to in Annexure A to the show -cause notice. There is no evidence of actual production and clearance of the said quantity of goods for the material period. The physical stock on 31.8.1991 was found to tally with the RG -1 recorded balance. There is no finding that the physical stock on any day prior to 31.8.1991 did not tally with the respective RG -1 recorded balance. As rightly pointed out by the counsel, there is no evidence of excess consumption of raw materials or excess consumption of electricity to support the allegation of excess production of over 1 lakh pieces of FTL during the material period. It has been consistently held by this Tribunal in cases involving similar facts that a mere difference in quantity of product between the RG -1 and any private record is not enough to arrive at a finding of clandestine production. The case law cited by ld. counsel is also to this effect. I further note that, though the lower appellate authority has recorded a finding of suppression of production against the assessee, it has not found any mens rea against them. Ld. DR has relied on a decision of the Supreme Court. That is a decision in the case of Naresh J. Sukhawani v. Union of India [1996 (83) ELT 258 (SC) :, 1996 (64) ECR 346 (SC)] which is to the effect that a statement of the co -accused can be used as substantive evidence connecting the accused with contravention of provisions of the Customs Act. I am at a loss to understand how this decision is relevant to the present case. Following the consistent view taken by this Tribunal in cases where the Department sought to go by private records to demand duty under the proviso to Section 11A(1) of the Act on goods on the ground of clandestine production and removal, I am inclined to find, in the instant case, that none of the authorities below has decided the case in a manner sustainable in law. In the absence of positive evidence of clandestine production and removal of the goods in question during the material period, I set aside the demand of duty and, consequently, the penalty. The appeal stands allowed with consequential reliefs to the appellants.