REGENCY CERAMICS LTD Vs. COLLECTOR OF CENTRAL EXCISE

JUDGEMENT

(1.) BY this application the appellants have sought for dispensation of the pre -deposit of duty demanded in terms of the impugned order and the penalty levied under the said order. The duty has been demanded form the appellants for the reason that on stock verification of the goods namely ceramic tiles manufactured by the appellants shortages were found as also some excess goods were found to be lying in stock. The excess goods found were ordered to be confiscated and have been allowed clearance on payment of redemption fine of Rs. 3.00 lakhs. After hearing both the sides, it was felt that the issue for consideration lies in a short compass and with the consent of parties the appeal itself was taken up for disposal dispensing with the pre -deposit of duty and penalty levied in terms of the impugned order. The operative portion of the order was announced in the open Court. The matter was ordered to be remanded with detailed orders to follow.

(2.) SHRI Narayanan, the learned Counsel, pleaded that the alleged shortages and the excess of the goods in the appellants factory were found as a result of the verification of the stock consequent on an intimation given to the authorities in May 1990 that due to extensive floods the appellants had suffered losses in their factory. He pleaded this intimation was given to the authorities on 12 -5 -1990 as required under the Central Excise Rules, 1944 and the authorities in spite of the intimation given did not depute any staff to do spot verification regarding the damage to the goods and the loss of the goods suffered and it was only on 21 -9 -1990 that a team of officers visited the appellants premises and did some verification and thereafter there was another visit of the officers on 25 -7 -1991, as a result of the complaints made by the appellants that the earlier verification done was not proper. The subsequent verification was done during the period 25 -7 -1991 to 28 -7 -1991 and as a result of that show cause notice was issued alleging shortages of 18 boxes of ceramic tiles and an excess of 3923 boxes of the said tiles. The learned counsel assailed the order on the preliminary ground that the show cause notice issued was without jurisdiction inasmuch as the duty has been demanded in terms of Rule 9(2) read with proviso to Section 11A(1) of the Central Excises and Salt Act, 1944 invoking the longer period of limitation by the Asstt. Collector who is not competent to issue the show cause notice in terms of Section 11A(1) proviso read with Rule 9(2) as the authority competent to issue the show cause notice under the said provisions is only Collector. On an enquiry from the Bench, he pleaded that no doubt shortages were found as a result of the stock verification and the matter in such a contingency is covered under Rule 223A but inasmuch as the authorities have chosen to revoke the provisions of Rule 9(2) read with Section 11A(1) proviso the Asstt. Collector could not have legally issued the show cause notice. Adverting to the facts of the case, he pleaded that the appellants had suffered extensive damage and loss of stocks on account of heavy floods which swept the area where the appellants factory was located and as a result of the floods chaotic conditions prevailed. He pleaded that appellants had been storing the tiles both inside the factory and also outside and the authorities were aware of the same. The appellants after the floods immediately went before the authorities with necessary intimation on 12 -5 -1990 and meanwhile they undertook salvage operations in their factory. He pleaded that the goods were spread over a large area and the goods being of different varieties depending upon their size, colour, etc. had all got mixed up and so as the boxes in which they were to be packed and also the boxes in which the goods were packed had been broken during floods and the appellants put these tiles in the boxes available. He pleaded that the authorities took their own time to visit the factory and came for the verification for the first time only after a period of seven months in January 91. The verification done by the authorities was flawed and on the representation of appellants another team of officers was deputed for second verification from 25 -7 -1991 to 28 -7 -1991 and the shortages and the excess for which the appellants have been charged were the result of this second verification. He pleaded that the Collector has fairly conceded in his order that the appellants had informed immediately after the floods the Supdt. Yanam range about the extensive damage to the appellants' goods suffered due to cyclone and sought permission for re -sorting of the goods and assessment of losses and damage. He pleaded they had also informed to insurance company in the matter. The Collector had in his order stated that "It is not understood as to why the Supdt. had not visited the unit and ascertained the loss as per the departmental procedures and that the assessees could not be put to a disadvantage for want of necessary timely action by the Supdt. The learned Collector he pleaded has accepted the loss as assessed by the insurance company. His plea is that the learned Collector should have independently applied his mind to the facts of the case and gone into the appellant's claim regarding the losses incurred including their claim filed before the insurance company before arriving at any conclusions. The learned Collector has not appreciated the appellants plea that shortages and the excesses were because of improper packing in the proper perspective. He pleaded the very fact that the verification done on 21 -9 -1990 was not proper and a second verification from 25 -7 -1991 to 28 -7 -1991 was ordered would only show that the task of verification was not only difficult but was cumbersome and in the background and circumstances of the case, the appellants plea could not be just brushed aside as done by the Collector by observing as under: -

(3.) THE learned DR pleaded that the learned lower authority was fair in allowing the allowance in regard to shortage as assessed by the insurance company and has taken note of the excess as was found on second verification done between 25 -7 -1991 to 28 -7 -1991. This second verification was done in the presence of the Commercial Manger of the appellants company. He fairly conceded that the learned Collector had not gone into the appellants claim made before the insurance company and the details therein and pleaded that he has no objection to the matter being remanded for de novo consideration.