ORDER
S.S. Sekhon, Member (T)
1. These appeals filed against the Order-in-Original No. 37/2000, dt. 28-11-2000 passed by the Commissioner of Central Excise, Hyderabad-III, in terms of which he has demanded duty of Rs. 96,15,910/- and imposed penalty of Rs. 96,21,652/- under Section 11AC and Rs. 4,00,000/- under Rule 173Q and offered redemption fine on goods ordered to be confiscated on the ground that the appellants had removed almost Rs. 5 crore worth of processed man-made fabrics without payment of duty during the period January 1997 to May 1997.
2.(a) The officers of the Department visited the factory of the appellants on 7-5-97, conducted verification of the stock of the raw material in-process material and finished goods; conducted enquiries. They searched the residential premises of one Shri Harshad G. Patel, an employee of the appellant Company, looking after the maintenance of the machinery, in the appellants’ factory, found certain documents in the form of delivery challans, grey check reports and job work cards at the said premises and recovered the same. They visited the business premises of M/s. Pramukh Textiles, one of the dealers of the appellants and undertook stock verification and recovered certain records from the said premises, recorded statements and recovered certain documents, certain delivery challans which appeared to be copies of the delivery challans found at the residence of Shri Harshad Patel were found in the factory.
(b) Shri Ashok Patel, Managing Director of the appellants, Shri Anil Kumar Agarwal, Director of the appellant-company allegedly ‘confirmed’ in statements, later retracted, that the documents relate to the appellant-company. Statements were also recorded from the Managing Director and proprietor of M/s. Pramukh Textiles who also allegedly “confirmed” that they had received processed fabrics from the appellant company without payment of Central Excise duty. These statements, recorded on 8-5-97 ‘confirming’ that the documents related to the appellant-company even before any attempt was made to find out the whereabouts of the author of the documents. In all the statements there was no reference to any single entry in the documents recovered by the Department with or by way of a question or an answer. No statement was recorded by the Department from Shri Harshad Patel from whose residence, documents were recovered by the Officers. Though records were recovered on 7-5-97 the first summons was issued by the Department only on 1-6-97, almost 20 days after the search operations. The Department thereafter concluded that the said employee was not traceable.
3. A show cause notice was thereafter issued to the appellants alleging that the documents found in the premises of Shri Harshad Patel related to the transactions undertaken by the appellants on the so called confessional statements of the Managing Director & Director of the company support that there has been a removal of about 32 lakh linear mtrs (Lmtrs) of processed man-made fabrics without payment of appropriate duty.
4. The Commissioner has passed the impugned order rejecting the contentions of the appellants and more or less confirming the demand made out in the show cause notice.
5. After considering the submissions and the material on record it is found:
(a) The Commissioner in Paras 54, 55 & 87 has sought to shift the burden of disproving the documents on the assessee by observing that they have not established that the said documents did not belong to them or that the figures in the documents do not represent production in the premises of the said assessee. This finding of the Commissioner is totally devoid of logic and is not backed by law. The liability of the appellant disproving the evidence relied upon, would arise only after the Revenue establishes that the documents or the entries therein relate to the appellants. The negative as is being expected cannot be proved.
(b) The plea, taken that there is no indication anywhere and that none of the documents viz., delivery challans, job work cards, the grey check reports to relate them or to the production in the premises of the factory during the period as alleged in the notice cannot be rejected by the mere finding that they were recovered from the residential premises of one of the employees and or the dealer; it will not ipso facto be evidence enough to prove that excisable goods have been removed without payment of duty as indicated in the figures and accounts mentioned on these documents. The alleged confessions recorded from the directors have been retracted. In view of the same, the department should have enquired into and established by recording the statements of Shri Harshad Patel, the alleged employee of the assessee from whose residence the documents were recovered to corroborate the same. There is a serious lapse on the part of the investigating officer in not making any efforts to contact the person from whose custody, the documents were recovered. He has been issued summons after many days. The Directors whose alleged statements are being considered to corroborate the documents, to allege production and clandestine removal from the factory premises, have not been questioned on any specific entry in these documents. The learned Advocate for the appellants read out from the said documents that they also relate to ‘KHADI’ which textile the appellants do not manufacture. The entire investigations and subsequent adjudications have been conducted with total lack of application of mind with blinkers on and refusing to view the situation except as proposed in the Notice. It appears to us that a very good case has been spoiled by lack of logical, persistent and purposeful investigation in this matter. Similarly, the adjudicator trying to shift the burden on the appellants has exhibited total disregard and application of mind. The documents as they exist, which are alleged to be duplicates of other set said to be recovered in the factory premises/dealers premises were required to be compared, painstakingly, by the investigator or and the adjudicator, to establish the fact of production and thereafter removal of the goods. No such effort by both of them appears. Therefore this order cannot be sustained. It is required to be set aside.
(c) The appellant has also submitted that no corroborative evidence about the material is available. On examination it is found, the Commissioner has observed in Paras 70, 83 & 84 of the impugned order that the department have acted on the faith of the admissions of the Director of the Appellant and had concluded the investigations. Therefore, there was no need by them to proceed further, as the burden of proof of prima fade proving the Revenue case had been discharged. We cannot approve this view of the Commissioner. The alleged admissions from the Directors recorded, due to the retractions, do not exist and cannot be relied. Therefore, it was the bounden duty of the investigators and the adjudicators, to have applied themselves to determine facts in the case against the assessee, or rule out the possibility of alleged clandestine removal by painstaking findings to be arrived at on basis of alleged duplicate/original documents and matching the same which might have corroborated the retracted statements. Revenue demands cannot be confirmed on faith reposed on the admissions which are later on retracted.
(d) It is settled law that while determining clandestine removal, the department has to take into consideration relevant factors like installed capacity, consumption of electricity, labour employed etc., to determine the quantum of production and then come to a conclusion. None of these factors have been found or established in the order impugned before us. The quantum alleged to have been removed during the short period of January to March is submitted by the appellants to be beyond the capacity of the appellant. This aspect has to be re-examined and re-determined along with the plea raised.
(e) The lop-sided manner in which the investigations had been conducted and adjudication order issued, would tilt the balance in favour of the appellants. However we find that prima facie there appears to be a case of clandestine manufacture and removal which is required to be proved. In the interest of justice we would not set aside the order and the notice, but would remit the matter back to the original authority to re-determine the issues based on the material on record after setting aside the impugned order. It is needless to emphasize that the appellants should be heard in these remand proceedings and a finding on each of the contentions raised by them be arrived at. We dispose of these appeals. Accordingly.