ORDER
V.P. Gulati, Member
1. These appeals are against the order of the Collector of Central Excise, Cochin, dated 9-6-88. Under the impugned order the appellants have been held to have removed beedis clandestinely during the period 4-7-82 to 14-11-86 and a duty of Rs. 14,33,231.40 has been demanded in respect of the same and a penalty of Rs. 2,00,000 has been levied on the firm and a penalty of Rs. 25,000 has been levied on each of the other appellants who are partners of the firm, under Rules 9(2), 52-A, 209 and 226 of the Central Excise Rules, 1944.
2. The learned Advocate for the appellants pleaded that originally the proceedings against the appellants were drawn consequent on a check done by the officers in the appellants’ factory and appellant-firm was found to have not accounted for over 29,123 Kgs. of tobacco and appellant was charged with having manufactured beedis out of this tobacco and clandestinely removed the same during February, 1985 to September, 1986. He pleaded that while this show cause notice was subsisting, a further check of the records was carried out, after these were seized from the appellant and the earlier show cause notice dated 10-11-86 was superseded by another show cause notice dated 17-6-87. In this show cause notice, the learned Advocate pleaded, there was no mention in regard to the shortages of tobacco but a note was taken of the number of wrappers & labels used for the beedis and taking into consideration the number of the same duty was demanded from the appellants as per Annexures I & II to the show cause notice. He has pleaded that during the course of the investigation statements were recorded from the accountant, Shri Jayapalan, and also the partners and some of the appellant’s customers and all that was elicited from them was that the appellants were sending some tobacco without any bills and vouchers and they were also receiving beedis which were not accounted for in the records. He pleaded that so far as quantification of the beedis which were alleged to have been removed clandestinely are concerned it was done only on the basis of the quantity of wrappers and labels which had been purchased by the appellants and which were found figuring in the appellants’ records. He has pleaded that the learned lower authority, however, in his order has quantified the beedis clandestinely removed based on the quantum of tobacco as entered in the EB-3 register, which were being statutorily maintained by the appellant’s firm, and so far as the wrappers and labels are concerned these have been stated to be in the nature of corroborative evidence in regard to the beedis manufactured and clandestinely removed. He had pleaded that the appellant was not put on notice by the authority in regard to the tobacco which has been stated to be unaccounted for and the authority has chosen to go by a piece of evidence which was not at all put to the appellants. He has pleaded that in case the appellants had been made aware in regard to the fact of utilisation of tobacco and the inference that the authority wanted to draw from the same he would have come forward with evidence explaining the position. He pleaded that the appellant has been prejudiced, because of this. He has further pointed out that so far as duty demand is concerned, as it could seen from para 20.2 of the impugned order, the same has been worked out purely based on the tobacco as figuring in the EB-3 register. The authority has merely taken the quantum of tobacco utilised by the appellant as figuring in the EB-3 register as having been utilised by the appellant for the manufacture of beedis. There is no other evidence nor any inference has been drawn from any statement as to the quantity of tobacco that was actually used by the appellant in the manufacture of beedis. He has pleaded that in view of the above the learned lower authority’s order cannot be held to be a proper order and the same is, therefore, not maintainable in law. He pleaded that, no doubt, there are elements which give rise to grave suspicion and the appellant has to give explanation in regard to the labels as also about the tobacco, but since the lower authority has chosen to go by the quantum of tobacco which was brought on record the appellant could not explain his position in regard to the same and given an opportunity they will be satisfactorily explain their position.
3. The learned DR for the Department has pleaded that the lower authority has gone by the totality of the evidence brought on record including the inculpatory statements of the partners and also Shri Jayapalan, who was looking after the affairs of the firm. He has clearly admitted that the tobacco was being removed by them without bills and they were also receiving beedis which were not brought on record. Further, he pleaded that the Department had made enquiries with some of the customers of the appellant, who have also admitted that they used to receive the tobacco without bills and they were also manufacturing beedis out of the tobacco received from the appellant. He has pleaded that merely because the learned lower authority did not come on record that the element of tobacco consumed would be taken into reckoning for arriving at the quantum of beedis manufactured would not prejudice the appellant inasmuch as there is enough evidence on record to show that the appellant was engaged in the clandestine removal of the beedis without payment of duty.
4. We observe that the Departmental authorities have done extensive investigation in regard to the operations of the appellants. They have brought on record evidence by way of statements as also the quantum of labels bought by the appellants. There is enough indication to show that the labels have not been accounted for by the appellants. However, it is seen that the learned lower authority instead of working out the duty demand based on this factor has chosen to go by the quantum of tobacco which was brought on record by the appellants and has worked out the number of beedis manufactured only on the basis of the quantum of this tobacco. The authority has taken the number of beedis manufactured per Kg. of tobacco as 2,500 and arrived at the figure of 50,71,57,500 of beedis and after taking into account the number of beedis cleared on payment of duty has arrived at the number of beedis clandestinely removed without payment of duty as 37,22,67,900 numbers. The lower authority has relied upon the evidence regarding labels only as a corroborative circumstance. We observe that the lower authority has rightly taken into consideration the quantum of tobacco utilised for the purpose of working out the figure regarding tobacco. As it is the tobacco which is prescribed as the principal raw material for the manufacture of beedis and it is statutory requirement that the record of the tobacco purchased is maintained by beedi manufacturers. Inasmuch, however, as reliance has been placed heavily on the quantum of tobacco purchased, it was incumbent on the part of the authority to have put the appellants on notice in regard to the same and asked the appellants to explain their position in regard to the utilisation of the tobacco which had been brought into the EB-3 register. Not having done that we are of the view that appellants have been prejudiced and for that reason, therefore, the learned lower authority’s order has to be held to be not a proper one. We like to observe here that this is one case where the lower authorities have gathered enough evidence and have done extensive investigation, but that is not enough. It is also equally duty of the persons adjudicating the matter to put the appellants on notice in respect of the various aspects which they are going to take into reckoning for arriving at the demand. In view of the above, we set aside the impugned order, remand the matter and direct the learned lower authority to re-adjudicate the matter in the light of our above observations after giving the appellants a reasonable opportunity of being heard.
5. Since it is an old matter, the matter should be decided as far as possible within a period of four months and the appellants are directed to co-operate with the authorities so that the adjudication could be done expeditiously.
(Pronounced in open court)