Decided on March 20,2015

Key Locks (India) Appellant
C.C.E. Respondents


D.N. Panda, J. - (1.)BOTH the appellants are in second round of litigation before the Tribunal. Tribunal in the earlier occasion by final order dated 17.01.2002 reported in : 2004 (165) E.L.T. 74 (Tri. Del.) ordered that there was shortage of 4,116 locks of Harrison Brand but assessable value thereof re -determined in terms of the decision of the Larger Bench in the case of Srichakra Tyres Ltd. vs. Collector of Central Excise, Madras reported in : 1999 (108) E.L.T. 361 (Tri.). Secondly, it was ordered that the issue of duty on the basis of job charges paid by the appellant was to be re -examined. Thirdly, there shall be re -examination of the issue of shortage of raw material and fourthly the duty demand of Rs. 2,16,938/ - on account of locks seized from the premises of M/s. R.P. Locks is to be re -examined for passing fresh order. Matter was remanded accordingly for Renovo adjudication granting cum -duty benefit.
1.1 Learned Adjudicating authority in the re -adjudication proceeding found that the shortage of 4,116 locks detected on 29.9.2000 by investigation during physical inventory was established and only re -determination of value thereof allowing cum -duty benefit was to be made. That was done. Appellants plea that the value of each lock is to be considered at Rs. 24.32/ - was not accepted by him. Referring the matter to the jurisdictional Assistant Commissioner, he re -determined cum -duty price of 4,116 locks and arrived duty liability of Rs. 28,954/ -.

1.2 So far as shortage of raw material is concerned, learned Adjudicating authority found clandestine removal of 1,49,524 key locks evading Central Excise Duty of Rs. 10,51,824/ -. He noticed that 250 gms of CR Strips were used for manufacture of 1,49,524 of number of locks valued at Rs. 76,75,725/ - out of shortage of 37,381 kgs of C.R. strips and 4526 kgs of MS wires detected during investigation. Those were unaccounted and removed clandestinely. Appellants plea that the raw materials found short during inventory was due to eye estimation and did not give rise to manufacture of 1,49,524 locks was found to be baseless. The authority granting cum -duty price benefit, duty demand of Rs. 10,51,824/ - was determined in re -adjudication.

1.3. So far as demand on job work charges is concerned, the authority observed that during period 1996 -97 to 1998 -99, job charges to the tune of Rs. 2,01,962/ - were paid. Considering 10% of the value of the lock to be job charges duty demand of Rs. 3,72,202/ - was determined. Appellants plea that 10% formula adopted was arbitrary was found to be baseless. Learned authority examined statement of Shri Ravi Jain, the authorized signatory who in his statement under Section 14 of the Central Excise Act, 1944 categorically stated that the appellant had two machines and those were power press and hard press. Various other activities were carried out by job workers. Value of the job worked goods was estimated fairly for loss of duty.

1.4 Fourthly, the locks seized from M/s. R.P. Locks were held to be clandestinely removed without payment of duty. Value thereof was determined by the authority granting cum -duty benefit and demand of Rs. 1,80,715/ - was raised on such count.

1.5 In view of above observations and findings on readjudication, demand arose on four counts: -

1. Re -determination of duty on 4116 locks detected short.


(2.)SHORTAGE of raw material alleged to be used in manufacture of clandestinely cleared goods.

Job worked value of goods escaped duty. 3,72,202

(3.)KEY locks found in the premises of M/s. R.P. Locks.

1.6 In addition to the above duty demand, penalty of Rs. 16,40,095/ - was imposed under Section 173Qof the Central Excise Rules, 1944 on the appellant manufacturer M/s. Key locks (India) and penalty of Rs. 2,50,000/ - was imposed on the appellant Shri Ravi Jain holding him guilty for not maintaining proper account of raw materials as well as finished goods and abetted in clandestine removal.

2. Against the aforesaid demand of duty and penalty, the manufacturer -appellant M/s. Key Lock (India) and its Authorized Representative Shri Ravi Jain came in appeal before the Tribunal.

3.1 Learned counsel for the appellants arguing on their behalf submitted that the investigation made on 29.09.2000 really did not result in any discrepancy but whimsically the investigating authority made allegation of shortage of 4,116 locks without proper examination. Therefore, there shall be no demand on that count by arbitrary valuation of goods.

3.2 Revenue, on the other hand, submitted that the Tribunal in first round of litigation has held that the shortage of 4,116 locks of Harrison brand was established. Therefore, appellant has no scope to re -agitating on this issue except re -determination of the value of the locks granting cum -duty price and work out duty liability thereon with consequence of evasion.

3.3 Revenue is correct to say that shortage of 4116 locks established in the reported decision aforesaid. Appellant did not place any material to suggest that the determination of cum -duty value of such locks was erroneous. When no cost sheet was placed by appellant to show the material component in each lock, labour and overhead charges incurred as well as financial expenses made, it is difficult to discard the finding on valuation made by learned Adjudicating authority. Therefore duty demand of Rs. 28,954/ - on such count is confirmed.

4.1 On the second issue of shortage of 37,381 kgs. of CR Strips and 4,526 kgs. of MS Wire detected during investigation, appellants submission was that entire finding of the Adjudicating authority in para 5.1 to 5.11.3 is baseless since the shortage was reported on eye estimation. The CR Strips and MS Wire were in cut pieces for use in the manufacture of locks. The authority did not make weighment thereof. He whimsically suggested shortage. Adjudicating authority's notion that shortage of 37,381 kgs. of CR Strips and 4,256 kgs. of MS Wire shall give rise to manufacture 1,49,524 locks is baseless. Similarly, valuation of the locks at the rate of Rs. 51/ - per lock is also without any merit. Accordingly, the demand of Rs. 10,51,824/ - is not called for. The authority no doubt granted cum -duty benefit but that is not the solace to the appellant.

4.2 Revenue on the other hand submitted that when the appellant failed to defend on unfound stock and no stock reconciliation submitted, the best judgment assessment made by the Adjudicating Authority holding that CR Strips of 37,381 kgs. and MS Wire of 4,526 kgs. gave rise to clandestinely removed key locks of 1,49,524 numbers cannot be faulted. The authority rightly determined duty liability of Rs. 10,51,824/ - on such count.

4.3 Even in second round, appellant failed to provide reconciliation statement of the goods of the above description found short during investigation. Once Panchnama was drawn in the presence of the witnesses, inventory found during investigation and recorded therein remain unquestionable in absence of any cogent and credible evidence to find fault in recording thereof. Plea of eye estimation fails to stand. Appellant did not provide any material to establish impossibility of manufacture of 1,49,524 locks. In absence of any technical or scientific data, it is not possible to discard the conclusion of arise of 1,49,524 locks out of shortage of goods found by investigation. Appellants should have come out with clean hands to show approximate weight of CR Strip and MS Wire used in manufacture of a lock of each specification, arise of scrap if any, wage incurred for manufacture as well as the overhead charges required in that regard. In absence of any such data, determination of value of the locks of 1,49,524 numbers cannot be found to be faulty. Shortage of raw material gives rise to the conclusion of clandestine clearance with the intention to cause evasion of duty. This can be said following the decision of the Hon'ble High Court of Madras in the case of Alagappa Cements Pvt. Ltd. Vs. CEGAT, Chennai reported in : 2010 (260) E.L.T. 511 (Mad.). Therefore, appellant fails on this count of demand also.


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