KARNATAKA MINERALS AND MFG CO LTD Vs. COLLECTOR OF C EX

JUDGEMENT

(1.) THESE appeals arise out of a common order dated 15.10.87 passed by the Collector of Central Excise, Belgaum, by which he had demanded duty of Rs.4,31,031.31 on O.P.Cement manufactured by the appellants under Rule 9(2) of the Central Excise Rules,1944, read with Section 11-A of the Central Excises & Salt Act, 1944 and the Collector in that order also imposed a total penalty of Rs.15,04,000/- on each of the appellants herein under the various Central Excise Rules including Rule 173Q.

(2.) The brief facts are that the appellants herein manufacture cement having their factory at Mathod in the Belgaum Collectorate. On 6.4.87, the Central Excise Officers of Dawangere and Headquarters Preventive Bangalore conducted simultaneous search on the factory premises of the appellants and at the premises of certain persons at various places. The current R.G. 1 Register which is a statutory record for the production of cement was not available at the factory. The officers then did a physical check of the cement stock which revealed that the physical stock of clinker was found to be 1547.840 M.T. as against balance of 3666 M.T. showing a shortage of 2,118.160 M.T. Similarly, there was a shortage in Gypsum also. The officers seized some of the records for further investigation. Based on the recovery percentage of the cement on the ratio of 1 Tonne of clinker to yield 98 to 100% of cement with addition of 5% Gypsum, the Department qame to the conclusion that the factory had manufactured a quantity of 2,118.160 M.T. of cement out of the equal quantity of clinker found short and that this quantity-had been removed by the appellants clandestinely without payment of Central Excise duty amounting to Rs. 4,76,586. The officers also searched the residential premises of one Hukkeri, Accounts Officer of the firm at Bangalore, and the seizure of certain documents therefrom, as well as the documents seized from the factory, led to the departmental conclusion that the factory had manufactured a quantity of 1915.695 M.T. of cement and removed it clandestinely without payment of duty of Rs. 4,31,031.38 during the period December, 1985 to April, 1987. Thus the total quantity on which Central Excise duty was evaded, according to Department, works out to 4,033.855 M.T. entailing a duty liability of Rs. 4,07,617.38. Shri M.R. Jayaram, appellant herein, Managing Director of the firm in a statement on 16.4.87 while admitting that there was shortage, said that it was attributable to Shri Hukkeri who is the Manager of the factory. He also admitted that there has been double transport of cement under one Gate Pass and removal thereof without duty. He also stated that the appellant company is prepared to pay the duty that is payable on these removals. Appellant Sitaram also gave a statement on 16.4.87 stating that he is the Director of the Factory and that Shri Hukkeri was appointed as Sales Officer and that for the omissions and commissions of Hukkeri, the Company is responsible. He also said that Shri Hukkeri was indulging in malpractices without his knowledge. Shri S.B.Hukkeri, Accounts Officer of the appellant firm also gave a statement on 16.4.87 in which he said that the sale of cement from the factory was strictly as per the written orders from the Head Office, Bangalore and oral orders of the Managing Director the whole-time Director and the Director. The despatches were made as per the advice from the Head Office. The cash relating to bona fide sales of cement was taken to the books of account but that which is received out of evasion of Central Excise Duty on cement was handed over to the Director at the site as well as at Bangalore. He also said that he was on leave from 7-3-1987 to 16-3-1987 during which period Shri Ramakrishna, Assistant Works Manager and the Stores Officer had sent the complete records to his residence at Bangalore in order to avoid being noticed in case of any search of the factory premises. He also admitted that he had made double transport under one Gate Pass as also to other malpractices found by the Department. Following further investigations, proceedings were initiated against the appellants which culminated in the Collector's order of adjudication against which the present appeals have been preferred.

(3.) SHRI K.K. Bhatia, the learned S.D.R. submitted that the plea that the Managing Director was unaware of the activities of Hukkeri is not tenable in view of the evidence contained in the statement, given by the Managing Director on 16.4.87 wherein he has said that he was shown the letter dated 2.3.87 written by Mr. M.M. Pasha of M.E. Road-lines who is their Transport Contractor, stating that the appellant factory had forced him to indulge in double transport transporting of cement without Gate Pass and sending cement to two destinations using only one Gate Pass etc. Therefore, appellant Jayaram was quite aware of the activities of clandestine removal of cement from the factory. It is also significant, according to the learned S.D.R., that the appellants have not spelt out what steps they took or what enquiries were made by them to get at the root of the problem of clandestine removal attributed by them to Hukkeri. In any case the learned S.D.R. pointed out that even after the search and seizure of incriminating documents, the appellants had not filed any criminal complaint against SHRI Hukkeri.