CCE Vs. SADASHIV ISPAT LTD.

JUDGEMENT

(1.) The respondents are manufacturer of alloy steel flats/bars and rounds, falling under sub -heading 7226.00 and 7228.00 of the CETA, 1985, On 18.2.2000, the central excise officers of Chandigarh paid a surprise visit to the factory premises of the respondents and after checking the record and stock, they found that 43.552 MTs of alloy steel flats and 11.998 MTs of alloy steel rounds were not recorded in RG -1 register. Shri Kewal Garg, Director of the unit could not; give any reason for the said excess than the recorded balance in RG -1 on the ground that he was away for few days and it will be due to negligence of the staff who maintained the record. Show cause notice was issued; to the respondents proposing to confiscate the quantity found in excess and demanding duty on the said goods and imposition of penalty on the respondents. The case was adjudicated by the Joint Commissioner who confiscated the goods found in excess and allowed the same to be redeemed on redemption fine and imposed penalty of Rs. 40,000 on the respondents. On appeal, the Commissioner (Appeals) set aside the confiscation of the goods and reduced penalty to Rs. 2,000 relying on the judgment of the Larger Bench of the Tribunal in the case of Bhilai Conductors (P) Ltd. v. CCE, 2002 (125) ELT 781.

(2.) Shri P.M. Rao, learned JDR appearing for the Revenue pleaded that in this case the order of the Commissioner dropping the confiscation of the goods is not correct. Once the goods are not recorded in RG -1 register, the same are liable for confiscation and penalty is imposable on the respondents. He relied on the decision of the Tribunal in the case of Media Video Ltd. v. CCE, New Delhi, 2003 (55) RLT 407 wherein it was held that "video cassettes found unaccounted lying in factory premises - - no explanation for non -accountal - - undisputed clandestine removal of other goods indicates intention - - Rule 173Q is attracted - - redemption fine and penalty upheld but reduced".

(3.) Shri Nand Kishore, learned Advocate, appearing for the respondents pleaded that the respondents have given proper reason for not entering the goods found in excess in RG -1 register as the process of annealing/painting was required to be done on the goods. Therefore, these goods had not yet reached RG -1 stage and these were not required to be entered in RG -1 register without completing these processes. He preferred to page 1119 of the book The Making, Shaping and Treating of Steel' edited by Harold E. Me Cannon (Eighth Edition) wherein flow sheets indicating general principal steps in the production of stainless -steel products, are given. For bars of after rolling the next process given is annealing straighten, pickle, condition and inspect. Similarly for slabs and plates after rolling the next process is anneal, flatten, pickle, inspect and then ship. From these processes it is clear that bars as well as slabs and plates after coming into shape are required to be annealed before these are considered as complete finished goods. He also produced the letter of their customer who had written to the respondents that the material should be properly annealed, ultra sound tested and painted. He relied on the decision of the Tribunal in the case of Bajaj Auto Ltd. v. CCE, Pune, 1995 (80) ELT 644 wherein it was held that phosphatizing chrome plating and annealing carried on the studs are incidental and ancillary to the completion of the manufacture of fully finished studs to be used as component parts in two/three wheeler scooters. He pleaded that the Commissioner (Appeals) has also accepted that though the contention of the appellant that the goods were in a semi -finished form, hence were not accounted for, is also valid, but otherwise also the goods lying unaccounted for in the factory premises are not liable to confiscation unless it is proved that the same were being cleared without payment of duty from the factory gate. He also pleaded that respondents had cleared the seized goods on payment of duty. In view of this, the Commissioner (Appeals) has correctly disposed of the appeal setting aside the confiscation of the goods and reducing the penalty.