Case Law Details
Maa Santoshi Tobacco Co. Vs Commissioner, Central Goods and Service Tax (CESTAT Delhi)
I find that only for not finding the statutory register being RG-I and Form-4 at the time of inspection by the Officers of DGCEI, adverse inference have been drawn without reference to the records of the appellant available with the Department, being the various returns filed from time to time and the inspection reports available on record. Admittedly, the audit has taken place in the factory premises of the appellant on 20.05.2013, which is four days before the date of search or inspection by the DGCEI. There is no adverse report on record by the Officers of the Audit team nor there is any whisper of any discrepancy in the stock of finished goods and raw material with respect to the quantity entered in the statutory register. I further find that no instance of clandestine clearance or attempt to clear clandestinely have been brought on record. Thus, there is absence of mens rea or any attempt by appellant to clandestinely clear the finished goods lying in the factory as on the date of inspection or at any point of time. I further find from the copy of Xerox copy of RG-I register filed in the appeal paper book, the stock of finished goods is partly lying in the finishing room and it is transferred to the inbond store room on completion. As per panchnama, I find that there is no such break-up of the finished goods. Admittedly, cigarette cannot be sold without it is being finished and packed. Thus, apparently there is discrepancy in the stock taking on the date of inspection. This discrepancy is also evident from the facts on record being – as per panchnama the cigarettes found and detained is 16,25,750 whereas as per the orderin-original confiscated quantity is 14,89,750. On the discrepancy being pointed out by the appellant Revenue has corrected the quantity as 14,89,750 which is recorded in para 4.5 to 4.8 of the order-in-original. Admittedly, there is no allegation by the Audit team which visited the factory on 20.05.2013 as to not finding of the statutory register(s). Rather the Audit team has made an endorsement on the RG-I register, that they have audited the records for the period July, 2012 to March, 2013.
I further take notice that the factory of the appellant was under physical supervision of the Officers of Central Excise Department. During the period of inspection Shri S. K. Lavasia, Superintendent and Shri Nathu Lal Jain, Inspector were posted at the factory of the appellant. As per Rule 6 of the Central Excise Rules, in case of cigarette the Superintendent or Inspector of Central Excise is required to assess the duty payable before removal by the assessee. Further, Rule 11 stipulates that no excisable goods shall be removed from the factory or a warehouse except under an invoice signed by the owner of the factory or his authorised agent and in case of cigarette, each such invoice shall be countersigned by the Inspector or Superintendent of Central Excise before the cigarettes are removed from the factory. I find that there is no allegation on the appellant of having removed any finished goods clandestinely without informing the Superintendent / Inspector. The arrangement of posting of Central Excise Officers round the clock was modified by the CBIC vide Circular No. 1055/4/2017-CX. dated 01.05.2017. The Board taking notice of limited number of officers posted in the Range and problem being faced in posting the Officers round the clock, and also by the cigarette manufacturing units, observed that in view of Rule 6 and 11 read together, the presence of Central Excise Officer is required for discharging the twin function of assessment of duty payable and countersigning the invoices before the cigarettes are removed from the factory. It was also observed that the view taken by some of the Officers in the Department that production in cigarette factory can take place only when the Central Excise officer is physically present is not correct. Further, observed that under the GST regime there is no such requirement of round the clock posting of Officers. It was thus clarified by the Board that round the clock posting is not mandatory but directory. Thus, evidently, round the clock posting of Officers in the cigarette factory have been modified only from 01.05.2017. Admittedly, at the time of inspection in the factory of appellant, there was round the clock posting of the Central Excise Officers. There is no allegation of any collusion between the Officers of Central Excise and the appellant in the show cause notice. Further, there is no allegation or suggestion in the show cause notice of any misgiving on the conduct of the Central Excise Officers posted during the relevant time. Further, I find that show cause notice is also defective for non joinder of necessary parties.
Tribunal have repeatedly held that any finished goods found not entered in the RG-I register on the date of inspection, are not liable for confiscation in absence of any finding of attempted clandestine removal of the excisable goods. Further, raw material which was found lying in the factory of the appellant was admittedly not manufactured by the appellant and as such the same is not dutiable in the hands of the appellant. Thus, there is no requirement of confiscation of raw material in the facts and circumstances.
I further find on a bare reading of Rule 25 read with Section 11AC of the Act, the order of confiscation and penalty can be made only in case of fraud, collusion, wilful mis-statement, suppression of facts or any contravention of the provisions of the law with intent to evade duty. There is no such allegation in the facts of the present case save and except non finding or non-production of the statutory register RG-I and Form-IV for the reasons that the same were missing and could not be located.
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