SHREE DIRA DYE-CHEM Vs. CCE

JUDGEMENT

(1.) THE brief facts of this case which arises out of the order passed by the Additional Collector of Central Excise, Vadodara wherein he has confirmed a duty demand of Rs. 26,543.62 P. on S.O. Dyes manufactured and cleared in excess of Rs. 2.5 lakhs and imposed a penalty of Rs. 1 lakh on the assessees, are that on 7.8.1986, the Central Excise officers, visited the factory premises of the appellants who are engaged in the manufacture of S.O. Dyes falling under TI 14 -D of the Schedule to the erstwhile Central Excise Tariff and under Chapter 32 of the Central Excise Tariff Act, 1985 (with effect from 1.3.1986). Preliminary checks of the records revealed that the appellants had cleared 100 kgs of S.O. Dyes valued at Rs. 35,000/ - under GPI No. 19 dated 29.3.1986 without payment of Central Excise duty i.e. at nil rate of duty under Notification No. 175/86 dated 1.3.1986 as amended, even though this Notification was not admissible in view of para 6 of the same Notification. The department was therefore, of the view mat this quantity was leviable to duty at the appropriate rate of clearances exceeding Rs. 2.5 lakhs value during 1985 -86. The statement of Smt. Pratimaben Arvindbhai Patel was recorded on the same date in which she stated that the appellant firm consisted of two partners viz. Shri Trilok Chand Jain and Smt. Nirmal Jain; that they manufactured wet Dyes etc.; that certain papers recovered from her purse contained details of sales, purchases and expenses in respect of Vat Magenta and she further stated that she was the Proprietor of M/s. P. Trading Company which is a firm engaged in trading of chemicals and dyes and supplies raw materials for manufacture of dyes to the appellants. Further investigation revealed that M/s. P. Trading Company was a fictitious unit created by the appellants. The private papers recovered from the purse of Smt. Pratimaben A. Patel showed clearances of Vat Magenta valued at Rs. 2,99,609/ - to various customers during 2.10.1985 to 31.12.1985 and out of this, it was found that S.O. Dyes worth Rs. 1,40,150/ - had been cleared without bills and without gate passes and without payment of duty. The statement of Shri Trilok Chand Jain, Director of the appellants factory, was recorded in which he admitted that Vat Magenta of the above value, was cleared during the above mentioned period through M/s. P. Trading Company without GPI and without payment of duty. His statement was confirmed by Smt. Pratimaben A Patel.

(2.) ON the basis of these facts, a show cause notice dated 7.11.1989 was issued to the appellants proposing recovery of duty on S.O. Dyes valued at Rs. 1,69,950/ - manufactured and cleared without payment of duty in excess of the value of Rs. 2.5 lakhs. The show cause notice also proposed imposition of penalty. The Adjudicating authority confirmed the duty demand on the basis of documentary and oral evidence and also the penalty; hence this appeal.

(3.) REGARDING the clearance of 100 kgs of Vat Indigo from 25.3.1986 to 31.3.1986, the appellants submit that since this was a regular clearance in which the relevant RT 12 had been filed in the month of April 1986 and approved, the demand of duty on this quantity is barred by limitation in the absence of suppression or fraud on the part of the appellants. They submitted that the relevant gate passes for clearances during this short period of 7 days are available with the department and therefore, it will be possible for the department to verify this aspect. We see considerable force in this submission. In the absence of specific finding on this point by the Adjudicating authority before whom the point was raised, we see no alternative but to set aside the duty demand on the clearances of 100 kgs of Vat Indigo between 25.3.1986 and 31.3.1986 and remand this part of the adjudication order to the proper Central Excise officer to consider the plea of the appellants that clearance of this quantity during this short period was a regular clearance under cover of GPIs and we hold that, if the appellants are able to establish to the satisfaction of the authorities below that this was indeed so, the demand of duty on 100 kgs of Vat Indigo cleared between 25th to 31st March, 1986 is beyond the normal period of limitation and that the extended period of limitation is not available to the department for this part of the demand, if the RT 12 returns for clearances were filed and approved. Having regard to the quantum of duty demand and further having regard to the fact that the demand for clearances between 25.3.1986 and 31.3.1986 has been set aside and remanded, we are of the view that the penalty of Rs. 1 lakh is disproportionate and requires reduction; we therefore, reduce the penalty to Rs. 25,000/ -.