2002 (1) TMI 1342

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....far as the Personal Penalty imposed on R.B. Patel is concerned, he has filed an Appeal E-105/99 wherein he has challenged imposition of penalty of Rs. 10,000.00. 2. The assessee-appellants, were engaged in manufacturing of 2 varieties of clocks namely simple clock and musical clock. Four orders in original have been challenged. We are concerned with the orders of confirmation of demand passed by the adjudicating authority where under he has confirmed the duty demand and imposed penalties. 3. Following are the details of duty demanded and penalties imposed appellants wise in the four orders-in-original which are under challenge before us : Description E/101/95 Ajanta-Transistor Clock Mfg. Co. E/121/95 Jayshree Industries E/103/95 Ellora Electronics E/102/95 Ajanta Time Industries Total Demand of Excise Duty 16997077 8917470 7511742 10696772 44123061 Modvat Misused Demand 2184353 2887377 3583077 10286663 18941470 Penalty on company 1000000 500000 500000 1000000 3000000 Redemption fine in lieu of confiscation of goods and machinery 50000 50000 50000 50000 200000 M.U. Patel Pers....

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....ing clocks it cannot be concluded that the production was suppressed. He further argued that unless a physical verification of all the raw material available on the date of the visit of the officers was done there cannot be a proper confirmation of demand of duty. He states that for manufacturing clock, it is not only the Melody I.C., Jhoomar Movt., Timer l.C., Stepper motor are involved, but also other raw materials are involved as indicated in the flow chart which is mentioned below :- He stated that the manufacture of the clocks involves production of various components used in production of the final product. One of the components made during the production of clocks is Clock Movements. The manufacture of Clock Movements involves costly imported items and therefore in order to account the movement of these items from one section of the factory to the other section, delivery challans were prepared. The movements of various items from one section of the factory to another section of the same factory as reflected in the delivery challan cannot be treated as clearance of the final product. He states further that as per the process of manufacture, the description of item issued a....

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.... Industries (Appeal No. E-102/95) and stated that the assessee, in this case have definitely removed the final product from the factory without properly reflecting in the production register. 12. We have considered rival submissions. 13. The process of manufacture of clocks involves manufacture of various components/parts and ultimate assembling of these into clock. One of the major items used in the manufacture of the aforesaid clock is the Clock Movements. In respect of musical clock, in addition to the Clock Movement, the other assembly used is chiming device or, musical device or musical circuit. One of the varieties of musical clock is jhoomar clock. In respect of the jhoomar clock, the jhoomar movement is the additional assembly used apart from the musical device and simple movement. 14. The appellants first manufacture these movements, chiming device and jhoomar movement in their factory by using various bought out inputs. 15. The appellants imported integrated circuit chips in the form of wafers, which are in the shape of disc. The wafer is cut in a wafer cutting machine to get integrated circuit chips. The IC chips is termed as timer IC by t....

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....perintendent of Central Excise to furnish the quantity of raw material purchased. The appellants vide their letter dt. 3-9-92 furnished all the documents for the purchase of material including the imported raw material. 21. Thereafter by their letter dt. 21-4-1994 the assessee informed the department as follows :- "We wish to inform you that we have stored and preserved all the rejected I.C.S. in our factory. According to our estimation we are having as on today nearly 16 Lakhs of pieces of Timer I.C. as rejected I.C.s. We have also preserved nearly 6 Lakhs pieces of Melody I.C. as rejected pieces." The grievance of the appellants is that these rejected ICS were not taken into account as well the physical verification of the closing stock was not done. In our view this is a correct way of approach to the problem. 22. Whenever the charge of clandestine removal is made, the department has to prove that assessee has procured all the raw materials required for the manufacture of final product; the assessee have utilised human resource in the form of labour and paid that much wages for the production of the quantity of units which have been confirmed in the Order-i....

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..... Ans : The base of these case may be taken from the figures appearing in the delivery challans and taking into account the raw materials used into production of Wall Clocks" As far as taking into consideration of Raw Materials used in the manufacture of Clocks are concerned, this is what Shri J.J. Fernandes, Superintendent of Central Excise had stated; when he was cross examined by the appellant on 5-2-94 before the adjudicating authority. "Q.38. Please point out from the SCNs. where the consumption of other raw material and components was taken into consideration : Ans : I may not have been pointed out in the SCNs. Q.39. A complete clock cannot be manufactured using 3 or 4 components. Indispensible components are required to be taken into consideration. Without Quartz Crystal no Quartz clock is manufactured. The wastage in quartz Crystal Clock is practically Nil. 30 Lacs Quartz Wall Clocks require 30 Lacs Quartz Crystal. Quartz Crystal are imported item. Have you taken into consideration Quartz Crystal ? Ans : Yes. Q.40. Can you point out from the S.C.N. the receipt of 30 Lacs of Quartz Crystal went into the production of 30 Lacs Quartz Wall Cl....

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....t is not the department's case that the job workers, had not return the processed material and the same was not shown to be used in the manufacture of final product. Therefore, we are of the view that under these circumstances, Modvat credit cannot be denied in this case. 28. In view of the fact that the department has not proved the clandestine removal and in view of the fact that Modvat credit has been wrongly denied, we decide the case in the favour of assessees. 29. That leaves us only with one question namely there were no. of judgments cited at the time of argument by the assessee, in support of the submission that mere non-accountal of few inputs cannot be the basis of allegation of suppression of production of final products when the manufacture of final product requires number of inputs. The following are some of the decisions referred to by the assessees on the aforesaid proposition : (A)    Oudh Sugar Mills Ltd. v. U.O.I. - 1978 (2) E.L.T. (J.172) (B)     Jay Enterprises & Ors. v. CCE - 2001 (136) E.L.T. 541 (T) = 2000 (41) RLT 107 (CEGAT) (C)     Pepsico India Holding Ltd. v. CCE - 2000 (122....