V. THOTHATRI Vs. CCE, MADURAI

JUDGEMENT

(1.) BY impugned Order -in -Original No. 18/92 dated 4.5.1992, the Additional Collector of Central Excise has confirmed the duty demand of Rs. 23,400/ -, being differential duty on 23,400 units of the matches cleared during the year 1990 -91 and has imposed penalty of Rs. 2,500/ - under Rule 209 and 226 of the Central Excise Rules. The basis for proceeding against the appellants is that on a visit to the appellants factory, the Superintendent of Central Excise found the appellants having produced matches in excess of the monthly production limit and on scrutiny of the R.G. 1 Register for the month of February, 1991, it was found that there was an entry of 3000 units (production), 600 units (closing balance) instead of 2900 units and 590 units respectively and this has resulted in evasion of duty. The statement was recorded on 26.6.1991 from the appellants, who explained that the entry in R.G. 1 Register for February, 1991 showing the production as 3010 units was due to clerical error in closing balance; that the corrections were made unintentionally and has accepted to pay rate of duty of Rs. 1.75 per unit for 3010 units produced in March, 1991. In the show cause notice issued on 26.9.1991, the Additional Commissioner demanded differential duty on 23400 units of matches cleared during the year 1990 -91 solely on the ground that as there was straight excess production for one month and hence they are disentitled for the benefit of Notification No. 22/82 dated 23.2.1982 which granted concessional rate of duty on conditions as follows: - -

(2.) THE learned advocate submits that in an identical issue, the Tribunal in the case of Sekar Match Industries v. CCE as reported in : 1990 (48) ELT 599 :, 1990 (31) ECR 616 (T) held that the department cannot proceed on the basis of assumption and presumption basis on suspicious circumstances of the nature of the manufacturing operation being carried out on a particular day and it cannot be taken to form a basis for demanding heavy duty for the period of three years in the absence of any acceptable evidence. The learned counsel further points out that the Tribunal had expressed its displeasure in the manner of investigation and proceeding to confirm duty on such an assumption drawn by the investigating authority. He points out that in a similar matter in the case of R. Manickathammal v. UOI & Others, the Hon'ble High Court in Writ Petition No. 2280/87 allowed the Writ Petition on a similar allegation of making corrections in R.G. 1 register with regard to one day's production and that day's production shows excess. The Hon'ble High Court relying on the decision of Sekar Match Industries (supra) had only upheld the levy of penalty of Rs. 2,500/ - but set aside the demand of duty, as the explanation of bona fide correction in the R.G. 1 register was required to have been accepted. A copy of the said order is placed for acceptance.

(3.) ON a careful consideration of the submissions, we notice that the department has proceeded only on the basis of assumption that there was an excess production for the month of February and March, 1991. The appellants had explained that they have not manipulated any figures but it had been due to clerical mistake the entries had been wrongly made which has been duly corrected and there was no excess production. They had also shown that the entire production did not exceed the limit of 150 million matches. The authority has not looked into the second proviso of the Notification but having found the explanation not yet satisfactory confirmed the demands. In a similar matter, the High Court of Madras in the case of R. Manickathammal in Writ Petition No. 2280/97 had accepted the explanation and held that the penalty was impossible for making alteration and erasures in R.G. 1. A similar view was expressed in the case of Sekar Match Industries (supra) which was noted by the High Court in the case referred to above. As the facts being similar, we have to follow the ratio thereof in the present case also. We therefore, hold that the department has not proved with regard to excess production with acceptable evidence and the explanation given by the appellants with regard to alterations and corrections made in the R.G. 1 is required to be accepted. However, the Hon'ble High Court in the noted case, confirmed the levy of penalty. Hence, in this case the penalty of Rs. 2,500/ - levied under Rule 209 and 206 is required to be confirmed, while the demand for differential duty is required to be set aside and we order accordingly. The appeal is allowed partially in the terms indicated above. The appellants are entitled for consequential relief to the extent of duty paid in this case.