LAWS(CE)-2004-3-307

RATHI SUPER STEEL LTD. Vs. CCE

Decided On March 25, 2004
Rathi Super Steel Ltd. Appellant
V/S
CCE Respondents

JUDGEMENT

(1.) The appellants in these two appeals are manufacturers of steel products falling under Chapter 72 of the CETA Schedule. Officers of Central Excise found excess stock of finished goods vis -a -vis RG -1 recorded balance as on 31.8.2001 in their factory. On another occasion, they found excess stock of both finished goods and raw materials vis -a -vis recorded balance in the respective statutory records as on 7.9.2001 in the factory. The officers recorded statements from the appellants under Section 14 of the Central Excise Act and made allied enquiries. On the basis of the results of investigations, the department issued separate show -cause notices alleging non -accountal of goods with intent to evade payment of duty and proposing to confiscate the excess goods and also to impose penalties. The show -cause notices were contested. The original authority, which adjudicated the dispute, confiscated the goods with option to the party to redeem the same on payment of fine. It also imposed penalties on the party. Aggrieved by the orders of the original authority, the party preferred appeals to the Commissioner (Appeals). The appellate authority upheld the confiscation but reduced the quantum of redemption fine as well as the quantum of penalty in each case. The present appeals are against the orders of the first appellate authority.

(2.) Heard both sides.

(3.) Counsel submits that the excess quantity, whether of finished goods or of raw materials, found in the appellants' factory on the dates of visit by the officers of Central Excise were only negligible, to the extent of around 2% of the total stock of the day. The difference in quantity of material in stock vis -a -vis the balance noted in the statutory records was satisfactorily explained to the investigating officers. In respect of the finished goods, the quantities noted in RG -1 were arrived at on the basis of cross -sectional weight of the goods, while the goods were cleared in terms of weights noted by actual weighment. The quantity difference noted by the department was on account of this. The department has no case that RG -1 was not maintained in respect of the finished goods. Their allegation that the excess quantity of finished goods was meant for clandestine removal is only based on an assumption and not on any evidence. Mens rea was not alleged in the show -cause notice, nor found by any of the lower authorities. In the circumstances, confiscation and penalty are not sustainable. Ld. Counsel, in this connection, relies on the Tribunal's decision in Bhillai Conductors (P) Ltd. v. CCE, 2000 (69) ECC 192 (T) : 2000 (125) ELT 781, wherein it was held that mens rea was an essential prerequisite for invoking Rule 173Q(1)(d) of the Central Excise Rules, 1944 for the purpose of confiscating excisable goods and imposing penalty on its manufacturer. Ld. DR for the respondent relies on the following High Court's decisions: