ORDER
K. Gopal Hegde, Member (J)
1. These appeals arise as under:
The Collector of Central Excise & Customs, Pune by his order F. No. V. (4)15-24/Adj/79 dated 16.4.1981 ordered confiscation of seized tobacco as well as snuff, but allowed redemption on payment of fine. He, however, released unconditionally 1402.300 kgs. of tobacco and 92 kgs. of roasted tobacco seized from M/s. Pawar Trading Co. He also imposed a penalty of Rs. 2000/- on the firm M/s. Pawar Trading Co. and Rs. 2,000/- on Shri Bapu K. Pawar, and Rs. 1000/- each on S/Shri S.K. Pawar., H.K. Pawar, R.B. Pawar, T.B. Pawar, S.H. Pawar and C.B. Pawar. He also imposed a penalty of Rs. 250/- each on Shri J.S. Lokare and Shri B.D. Lokare. Feeling aggrieved by the order of the Collector, the firm M/s. Pawar Trading Co. as well as all the Pawars and Lokares filed seperate appeals before the Central Board of Excise & Customs. The Board clubbed all the appeals and by a common order bearing No. 191-200 of 1981 dated 12.10.81 allowed all the appeals and set aside the confiscation and the fine in lieu of confiscation as well as the penalties imposed on the firm as well as on the other individuals. The Government of India, however, in exercise of their power under Sec. 36(2) of the Central Excise & Salt Act, 1944, as it then stood, issued a show cause notice to the firm as well as the present respondents herein requiring them to show cause as to why the order passed by the Board should bot be set aside and why such other order as deemed fit. by the Government should not be passed. The Government of India’s show cause notice was dated 6.10.82, the respondents herein, appeared to have received on 12.10.82. They addressed letters to the Govt. of India as to whom they should send their reply since by the time they received the show cause notice, the Customs, Excise & Gold (Control) Appellate Tribunal had been constituted and bdgan functioning with effect from 11.10.82. When they did not receive any reply they felled their cross objections before the Tribunal. Since none of the respondents herein claimed any specific relief excepting stating that the Board was correct, the cross objections were directed to be filed.
2. After the constitution of the Tribunal, this proceeding which was pending before the Government of India stood statutorily transferred to the Tribunal for being heard as appeal, hence there appeals.
3. As all these appeals involved common questions of law and facts, they are clubbed together, heard together and hence this common order. As certain of the facts required for the disposal of these appeals are set out in the order of the Collector, it is unnecessary to repeat those facts. Suffice, if reference is made to a few facts, which have bearing of the disposal of these appeals.
4. M/s. Pawar Trading Co. is a partnership concern and the partners at the relevant time were the respondents S/Shri Ramachandra B. Pawar, Suresh Hari Pawar, T.B. Pawar. The respondents S/Shri Bapu K. Pawar, Ramachandra B. Pawar and Shankar K. Pawar are real brothers. The respondents Shri Chandrakant B. Pawar is the son of Shri Bapu Khandu Pawar. Shri Suresh Hari Pawar is the son of Shri Hari Khandu Pawar. Shri Tukaram B. Pawar and Shri Ramachandra B. Pawar are the sons of Shri Bapu K. Pawar’s elder brother by name Shri Baburao Pawar. Shri Bapu K. Pawar, his two brothers and their children were living together but Shri T.B. Pawar and Shri Ramachandra B. Pawar were living seperately. All these Pawars were agriculturists except Shri Chandrakant B. Pawar who was a college going student at the relevant time. They were cultivating among other things, tobacco in their agricultural land. Shri Bapu K. Pawar being the eldest in the family at the relevant time was guiding the rest of the member of his family as well as his brothers’ children. Respondents, Shri Jagannath S. Lokare and Shri Balwant Dattu Lokare are farm Labourers. They were living seperately and they are not related to each other. They were also not related to any other Pawars.
5. This litigation had already taken toll of 5 persons. Shri Bapu B. Pawar died on 11.9.87. Shri S.K. Pawar expired on 31.12.86 Shri J.S. Lokare expired on 28.5.86. The department did not bring on record the legal heirs of the three deceased persons. Therefore, the appeals against those three persons abate, and as such the 3 appeals viz. ED (T) BOM 52/82, 56/82 and 59/82 are dismissed as abated.
6. During the hearing of these appeals Shri Prabhu, the learned departmental representative submitted that the Board committed a grave error in setting aside the order of confiscation and the pelalties. He conducted that the Board did not property considered the evidence on record and the findings of the Collector. The Board’s observation that the Collector did not record finding as to the contravention of Rule 9(1) of the Central Excise Rules is incorrect. The Collector did record a finding as to the contravention of Rule 9(1). Shri Prabhu, further contended that if the Board found that there had been a violation of principles of natural justice, the proper cause which the Board ought to have adopted was to remand the matter and instead the Board had set aside the order of confiscation and the penalites. He, therefore, urged that the Board’s order may be set aside and if deemed fit the matter may be remanded.
7. In the review show cause notice issued by the Secretary Government of India, it was stated that” on going through the impugned order in appeal it appears that it is not proper and correct in law and is not based on facts on record.
On perusal of the order in original pertaining to the observations made in the order in appeal it appears that the charges under Rule 9(1) have been duly dealt with and the defence put up was rejected. As such the penalties imposed appear justified. The charge of manufacturing snuff without lincence is correctly held as having been proved. The dhus mix mati seized in this cases is clearly found as not from a destroyed tot. Further, the imposition of combined fine appears appropriate in view of the fact that the persons belong to a joint Hindu Family. Further, if the case suffered from any infirmity of denial of natural justice as held in the impugned order the proper course indicated for the appellate authority was to remand the case for denovo adjudication after due compliance with the principle of natural justice. But this was not done.”
8. One of the contentions urged before the Board was that in the show cause notice issued to the appellants there was no allegation of violation of Rule 9(1) in respect of the seized tobacco. The further contention was that the Collector did not record any finding as to the contravention of Rule 9(1). The third contention was that there was no demand for duty in the show cause notice and also in the order passed by the Collector and as such it cannot be contended that there had been contravention of Rule 9(2) requiring imposition of penalties on the respondents herein. The Board, no doubt, did not in detail refer to the various statements recorded during the investigation and the evidence collected. But then, the Board was satisfied that there had been improper consideration of the evidence by the Collector and it was further satisfied that the collector did not record a finding that the seized tobacco as well as snuff were removed without payment of duty. The Board also found fault with the Collector for clubbing all the quantities together seized from the possession of various persons and then passing a combined order to fine. The Board further found that in the absence of any evidence to conclude that there was any unauthorised clearance without payment of duty, that would not be a fit case to be persuedon the basis of fresh adjudication in compliance with the procedural requirements. The Board, therefore, extended the benefit of doubt to the appellants before it and set aside the Collector’s order.
9. As has been pointed out earlier, the Government of India in the show cause notice and Shri Prabhu during the hearing have taken serious objection as to the Board’s observation that there had been no clearing finding by the collector as to the violation of Rule 9(1). The Govt. of India as well as Shri Prabhu have stated that there was a dear finding by the Collector as to the violation of Rule 9(1).
10. At this stage I shall not refer to the various contentions which are very relevant advanced by Shri Kulkarni. I shall only refer to the Collector’s order. While narrating brief facts of the case, the Collector had extracted the gist of the show cause notice issued to the present respondents, which reads-
” By the show cause notice dated 28.6.79, Shri Bapu Khandu Pawar, his two brothers S/Shri Shankar and Hari, his nephews S/Shri Ramachandra, Tukaram and Chandrakant (Sons of his late brother Shri Baburao) Suresh (son of Shri Hari) all members of H.U.F. of Pawar, Malkhed (Dt. Satara) and S/Shri J.S. Lokare and B.D. Lokare stand charged with receipt of unmanufactured tobacco without transport document and its storage without a Central Excise licence. Shri B.K. Pawar, his two brothers and nephews Used above are also charged with the manufacture of snuff from such clandestinely received tobacco, without a Central excise licence and its removal without payment duty. By the same notice M/s Pawar Trading Company of which the nephews Ramachandra, Tukaram and Suresh are the partners, the tobacco receipted in their accounts on 21.9.75 and 10.10.75. They are also charged with invalid transport of tobacco to weekly markets Kumbhargaon and Dhesewadi from 22.6.76 to 27.7.77. It is further alleged that they failed to maintain proper accounts of the raw material (tobacco) received by them and the snuff manufactured and bonded by them. They have also been charged with failure to proper marks and numbers on bonded stocks and also with the failure to note the dated of receipt of tobacco on the reverse of the transport document. They have been called upon to state why the tobacco/tobacco under manufacture of snuff and snuff under seizure should not be confiscated under the provisions of Central Excise Rules and why they should also not be penalised thereunder.”
If the Collector had correctly extracted the show cause notice in which different charges were made against the partnership firm and the other individuals, the following was the charge against all the respondents:
Receipt of unmanufactured tobacco without transport document and its storage without Central Excise Licence.
11. In addition, to the above charge, against Shri B.K. Pawar, his two brother and nephews another charge was made viz. manufacture of snuff from such clandestinely received tobacco, without a Central Excise Licence and its removal without payment of duty. This charge had not been made against Shri J.S. Lokare and Shri B.D. Lokare. the remaining charges were against the partnership firm. It is not against the 2 Lokares or other Pawars who were not the partners of the firm.
12. In the whole of the show cause notice neither the partnership firm nor the individuals referred to in the show cause notice were called upon to pay Central excise duty in respect of clandestine receipt or removal of tobacco without payment of duty. No demand of duty was also made against the partnership firm or any of the partners.
13. The teamed Collector had passed a lengthy order running into closely typed 23 pages excluding of course the names of the persons, the notice etc. In the whole of his order the Collector did not direct any of the respondents herein or the partnership firm to pay Central Excise duty either in respect of clandestinely removed tobacco or snuff.
14. The gist of Rule 9(1) of the Central Excise Rules is that no exciseable commodity shall be removed from the place of manufacture unless the duty liability is discharged. The allegation in the show cause notice issued by the Secretary to the Government of India and the contention of Shri Prabhu viz. that the Collector had recorded a specific finding as to the violation of Rule 9(1), is difficult to accept. As pointed out earlier, in the show cause notice itself duty had not been demanded from any of the parties. While adjudging confiscation and penalties the Collector did not call upon any of the parties to pay duty. If there had been removal of excisable goods from the premises of manufacture without discharging the duty liability one cannot expect the department not to demand duty in respect of removal without payment of duty as one of the charge in the show cause notice. One also cannot expect the Collector of Central Excise in an adjudication proceedings not to demand duty in respect of the goods which were removed without discharging the duty liability. There appears no basis at ail for the Government of India to make the above allegation. The only other contention taken in the show cause notice and urged by Shri Prabhu during the hearing was that the Board ought to have remanded the matter if there had been a violation of principles of natural justice for passing a fresh order in compliance with the principles of natural justice. It is not that the Board was oblivious of the necessity to remand the matter. The Board was well aware that if there had been a denial of principles of natural justice, the matter should be remanded for proper compliance. But then, the Board rightly thought that the facts and circumstances of the case did not justify the remand for fresh adjudication.
15. Apart from the gross irregularity in the order passed by the Collector as to the clubbing of the goods together, the learned Collector had not considered the evidence which were favourable to the respondents herein. If the Collector had considered that evidence probably his findings would have been different. The Collector, appears to be of the view that whatever had been stated by the party immediately after the seizure alone to be taken into consideration and not the evidence subsequently adduced. The Collector has also lost sight of the fact that in order to bring home the contravention under Rule 9(2) the initial burden of establishing the clandestine removal is on the department and it is only after the department discharges that burden the onus shifts to the party to rebut the same. There was no evidence whatsoever before the Collector to establish that any manufacturing process was carried out in the residential premises of any of the respondents. There was no evidence as to the workers employed or as to the Instruments or equipments applied in the so called clandestine manufacture. Just because the Collector found some tobacco and some snuff he cannot conclude that there was clandestine removal or clandestine manufacture of snuff. The documentary evidence produced by the party in the form of receipt of purchase of tobacco was not at all considered. The person from whom the snuff was purchased was not allowed cross-examination in spite of the request. Shri Kulkarni had contended before me that during the hearing the Collector was requested to offer Shri Baldwa from whom roasted tobacco was purchased and in respect of which receipt was produced as well as the Deputy Chief Chemist on whose reports the reliance was made in the show cause notice, for cross-examination. Shri Kulkarni had submitted that the Collector had agreed to offer those two persons to cross-examination but later on told the respondents herein that since those persons cannot be offered for cross-examination he would not rely on the evidence while passing his order. But then, the Collector relied on the evidence of Dy. Chief Chemist’s report. By not accepting the receipt of the purchase of the tobacco, he denied the opportunity to the respondents herein to establish their case. If Shri Bauwa had been offered for cross examination the purchase of tobacco as well as the receipt would have stood proved.
16. It was also contended by Shri Kulkarni that the partnership firm was not operating under SRP. There was physical control at the relevant time. All the respondents were living either adjacent or opposite to the factory premises. When there was physical control, it is highly improbable that large quantity of tobacco and snuff could have been Clandestinely removed from the factory premises. Shri Kulkarni submitted that the firm had been functioning since the year 1975. They have cleared 19600 kgs. of duty paid snuffs on self. The duty paid snuffs removed on self were either kept in the residence or some part of it were sold in the village Shandies. The Collector did not consider this evidence at all. The Collector also did not consider the evidence of the panch witnesses who corroborated the versions of the respondents herein. In the circumstances, the Board was justified in observing that there had been improper consideration of evidence. The Government of India was totally unjustified in issuing show cause notice solely based on the report made by the very adjudicating authority and without looking into the other records in the case. The Collector had ordered confiscation of (a) 30 packages of finished snuff weighing 1291.250 kgs seized from the possession of Shri B.K. Pawar and S.K. Pawar (b) 3 packages weighing 180.00 kgs seized from the portion of the premises of Shri R.B. Pawar (c) 20 packages of tobacco weighing 1026 kgs seized from M/s. Pawar Trading Co. in addition to one package of branded chewing tobacco weighing 5.500 kgs. seized from the premises of S/Shri B.K. Pawar and S.K. Pawar. But permitted redemption of these on payment of fine of Rs. 1500/-.
17. The Board in its order observed that clubbing up of goods recovered from different persons and providing for one combined fine for all of them was incorrect.
18. The Government of India in the show cause notice however of the view that the imposition of combined fine appropriate in view of the fact that the persons belong to a joint Hindu family.
19. The Government of India’s observation is factually incorrect. Some of the goods were seized from a partnership firm. Can a partnership firm be equated with joint family? They are two distinct entitles. The Board’s observation is very apt and it should prevail.
20. On consideration of all the materials, I see no reason to interfere with the order passed by the Board. As rightly observed by the Board, the facts and circumstances of the case did not warrant remand for fresh adjudication. The seizure took place on 2/3-1-1979. The adjudication order was passed in April 1981. The Board’s order was on 12-10-1981. The review show cause notice was issued on 6-10-1982, nearly a year after the Board passed the order. The inferior quality of the tobacco and snuff seized, by this date would have become useless for any purpose let alone for human consumption. As rightly contended by Shri Kulkarni, by this time they would have become earth.
21. Before parting with this case, it is necessary to refer to the submission made by Shri Kulkarni which brings out the attitude of the department towards the poor illiterate villagers. In his order the adjudicating authority directed the release of the seized tobacco and the snuff on payment of fine. He had further directed the release of 1402.300 gms of tobacco and 92 kgs. of roasted tobacco unconditionally. It appears that the authorities were approached for the delivery of the tobacco as well as roasted tobacco, which were unconditionally released by the adjudicating authority in his order dated 16-4-1981. But no such release was made. The respondents offered to pay the fine in lieu of confiscation. Even though, the Collector had given that option the departmental authorities did not allow them to exercise that option. This attitude has neither benefited the Department nor the Nation. On the other hand, certain loss and inconvenience must have been caused to the Department. The valuable storage place available to the department was used during this long nine years for the storage of worthless commodities which have now become dust and earth. The conduct of the department, I should say, is most reprehensible amounting to harassment.
22. A copy of this order may be forwarded to the Central Board of Excise and Customs for information and taking such action as deemed fit.