S.L. Peeran, Member (J)

1. The appellants are aggrieved with the order-in-original No. 18/MP/91 dt. 18-3-1991 passed by the Collector of Central Excise and Customs, Vadodara confirming the demands raised in the show cause notice dt. 4-10-1990 and has demanded duty amounting to Rs. 3,02,67,299.90 (Three crores, two lakhs sixty seven thousand two hundred ninety nine and paise ninety only) Basic Excise duty Rs. 2,88,25,800.47 + Special Excise duty - Rs. 14,41,491.43) in respect of alleged illicit removal of Acrylic Fibre during the period October, 1989 to August, 1990 under the provisions of Rule 9(2) of Central Excise Rules, 1944 read with proviso to sub-section (1) of Section 11A of Central Excises and Salt Act,1944.

(i) Imposed a penalty of Rs. 1 crore under Rule 209 of Central Excise Rules, 1944.

(ii) Ordered confiscation of land, building, plant and machinery etc. belonging to them and used in the manufacture, production, storage and removals of Acrylic Fibre under the provisions of clause (a) to sub-rule (2) of Rule 209 of Central Excise Rules, 1944. However, granted redemption of the same by imposing a fine of Rs. 1 lakh.

2. The appellants are engaged in the manufacture of "Acrylonitrile" falling under heading/sub-heading 2926.00. They are also manufacturing "Acrylic fibre" falling under head/sub-heading 5501.30. They are consuming the "Acrylonitrile" within the factory of production for manufacture of "Acrylic fibre" and were availing set off of duty on said "Acrylonitrile" under Notification No. 225/86-C.E., dated 3-4-1986 at the time of clearance of "Acrylic fibre"

3. The allegations set out in the Show Cause Notice dated 4-10-1990 are that on the basis of the information received to the effect that the appellant/assessee had been debiting the entire amount of duty from RG 23A Part-II account on the clearance of "Acrylic Fibre" and that they have not been discharging their duty liability as per the ratio declared by them and approved by the proper officer of the said clearance and thereby evading huge amount of payment of proportionate duty from PLA.

4. The officers of the Department visited the factory and carried on checks and verifications on 27-9-1990. The officers have found that the assessee had been availing set off of duty in respect of "Acrylonitrile" used in the manufacture of "Acrylic fibre" since August, 1989, as provided in the Notification No. 225/86-C.E., dated 3-4-1986 as amended. It was further observed that the assessee had filed declaration on 20-7-1989 giving ratio of input to output i.e. the quantity of input required for the manufacture unit of output (finished product) and other detailed viz. quantity of input lost during the manufacture of one unit of output, and not quantity used in one unit of output. It was further observed that for the period from Oct., 1989 to Aug., 1990 the assessee had debited the entire amount of duty from RG 23A Part-II account only and not as per the ratio declared by them and approved by the proper office. The statement of Shri S.S. Bhatnagar, Deputy Manager (Excise and Customs) in the assessee company was recorded. In his statement among other things, he has stated the assessee had started availing set off of duty on "Acrylonitrile" used in the manufacture of "Acrylic fibre" since August, 1989. He admitted not having maintained set off register but submitted that they had maintained RG-23A Part I and RG 23A Part-II account register. He has further stated that they had debited duty on the clearances of "Acrylic fibre"/"Dry skin Acrylic fibre" from RG-23A Part-II account only except additional Excise duty under Textile and Textile Articles Act. On a query from the officers to explain as to why they had not followed the approved procedure, Shri Bhatnagar had explained that a huge amounts of set off had accumulated during the period from Aug., 1989 to Oct., 1989 on account of payments through PLA and therefore the eligible amounts of set off out of available amounts of set