ORDER
I.J. Rao, Member (T)
1. The appellants manufacture snuff which at the relevant time fell under tariff item 4(II)(IV) of the Central Excise Tariff. They also held a licence for dealing in un-manufactured tobacco on which duty was paid.
2. Central Excise Officers of Ahmedabad visited the applicant’/s premises on 17-3-1979. They noticed that the appellants did not show any production of snuff for the period from 1-1-1978 onward. The officers then examined the business records of the appellants and came to the tentative conclusion that the appellant manufacture and removed a quantity of snuff from the factory without making payment of duty and observance of other Central Excise formalities. After further investigation they issued a show cause notice to the appellants. Words of the show cause notice are reproduced below to show the details of allegations and the basis thereof:
“As it appeared, for the reasons earlier stated, that the party had resorted to un-accounted production and illicit removal of Snuff totally weighing 30,279.4 kgs. (net) that is 24066.2 kgs. of ‘Special Brand and 6213.2 kgs. of Sada Brand Snuff. The investigating Officer addressed himself to the task of finding out the quantity of un-manufa-ctured tobacco consumed by the party in the manufacture of the Snuff abovesaid, for which purpose manufacturing sample experiments were carried out at the party’s factory on 31-5-1979, 7-6-1979, 8-6-1979 and 12-6-1979 in the presence of its representative. On the basis of the results of the experiments, the Assistant Collector of Central Excise Division-Ill, Ahmedabad approved the manufacturing formula, according to which the party had manufactured 11.3 kgs. and 11.1 kgs. of Special Brand Snuff and Sada Brand Snuff from 10.0 kgs. of un-manufactured tobacco each. Applying the tested and approved formula, the party had consumed 21,297.52 kgs. and 5,597.48 kgs. of un-manufactured tobacco in the illicit .manufacture of special brand snuff weighing 24,066.2 kgs. and 6213.2 kgs. of sada brand snuff respectively which all (un-manufactured tobacco) appears to have been acquired by the party in the illicit manner as the manufacture and removal of snuff, from time to time, that is, is a manner contrary to the Law and without payment of the duty of excise leviable thereon.
Investigation with reference to the original invoice dated 22-10-1976 issued by M/s.Patel Fulabhai Jiwabhai and Sons of Dharrnaj in favour of the party and produced by the letter on 19-3-1979 through the agency of Tejsing Jawansing, partner in the firm, revealed that the party received in its factory 4000 kgs. of deshi black chopadia tobacco, valued at Rs. 20,000/- from the former, without cover of any prescribed central excise, transport document and without payment of duty and in a manner other-wise than as provided in Law.
In the course of investigation, Tejsingh Jawansingh Rao, a partner, gave statements on 17-3-1979, 19-3-1979, 26-7-1979, 3-8-1979 and 16-8-1979 for and on behalf of the party. While admitting illicit removals of snuff weighing 30,279.4 kgs. from their factory from time to time, without accounting it in the statutory register of production, removal etc. and without payment of duty and confirming the details of such removals, he, inter-alia, stated that they had resorted to such acts due to heavy debt and bad financial condition, that for the sale of snuff, cleared direct from their factory, they had issued bills to the customers in the form of ‘Shop-Memo’ to make the customers believe that the goods sold to them thereunder licit duty paid goods, supplied to them from their shop, that their factory was regularly working as witnessed by electricity bills and, salary bills for the wages paid to their workers, that the pre-budget stock of snuff they had (when duty was imposed on snu0ff with effect from 1-3-1975) in their city godown, was disposed of in the Samvat Year 2033, that, after Samvat Year 2033, they had not sold any snuff pertaining to prebudget stock from their shop in the city, that they had purchased and received 8000 kgs. (actually 4000 kgs.) of non-duty paid black chopadia tobacco from M/s.Patel Fulabhai Jiwabhai & Sons., Dharmaj and had used the same in the manufacture of snuff which was removed by them illicitly.
Shri Vasant Raghunath Bhide, booking clerk in M/s.Rajavir Transport (Ahmedabad) Co., Narol, in his statement given on 24-7-1979, mainly stated that since last 3 to 4 years they used to receive snuff from M/s. J.V. Rao of Sarkhej in tempo for transport to different parties in Saurashtra.
Shri Natvarsinh Pratapsinh Chavda, owner of Tempo No. 2694, was interrogated and his statement recorded by the integrogating officer on 24-7-1979. The Principal avertment made by him, in his statement, is that he used to transport snuff in wooden boxes from the factory of the party in Sarkhej to M/s. Rajavir Transport Co., G. Dalabhai, Gurukrupa Transport Co., Mahendra Transport Co. and Ors. all at Narol, for onward transport in trucks and that the party used to pay him Rs. 18/- per trip from Sarkhej to Narol.
Shri Arvindbhai R. Patel, a partner in M/s.Patel Fulabhai & Sons of Dharmaj, referred to above, holding Central Excise Licence in Form L5, admitted in his statement recorded on 21-5-1979 that the deal for the tobacco in respect of which they had issued bill dated 3-11-1977 was, in fact struck with the party and the tobacco supplied to it. He further stated that they had also received the amount charged in their bill. He, however, did not recollect the name of the grower/ curer from whom the tobacco was purchased. As far as he could recollect, the tobacco was sent without payment of duty and all arrangements for its transport were made by Rao of party and he did not know any details thereof.
In view of the foregoing, it appears that M/s. J.V. Rao the party, had, with intent to evade duty by reason of fraud, wilful misstatement and suppression of facts, manufactured and removed from their factory a total quantity of 30,279.4 kgs. of snuff during the period 26-11-1976 to 17-3-1979, without accounting the same in their statutory EB.4 Register, without paying central excise duty leviable thereon, without cover of statutory central excise gate pass and generally in a manner contrary to the Law and have thereby contravened the provisions of Rule 9 read with Rules 52, 52A, 53 and 226 of the Central Excise Rules, 1944.
M/s.J.V. Rao, the party, further appear to have received into their premises or custody or possession and consumed a total quantity of 26,895 kgs. of contraband un-manufactured tobacco, witnessed by the fact that its transport was not covered by valid statutory central excise transport permit, showing that proper duty had been paid thereon and the fact that its receipt was not accounted for in their statutory EB.3 Register and have, thereby contravened the provisions of Rule 32, 40 and 42 of the Central Excise Rules, 1944.”
3. The show cause notice was also addressed to M/s. Patel Fulabhai Jivabhai & Sons who were alleged to have sold 4000 kgs. of non-duty-paid tobacco to the appellants.
4. The Collector of Central Excise, Baroda adjudicated the matter and demanded duty on snuff allegedly removed without payment of duty. He further demanded duty on 26,895 kgs. of manufactured tobacco allegedly received by the appellants and consumed by them. In addition he imposed a penalty of Rs.2000/- on the appellants. In respect of M/s. Patel Fulabhai Jivabhai & Sons he imposed a penalty of Rs.2000/- only under Rule-32.
5. An appeal to the Central Board of Excise & Customs by the present appellants resulted in its rejection. In very brief order the Board decided as follows:
“The Board is of the view that the statements recorded from Tejsingh J. Rao and his Father contain clear admissions of illicit removal. Even during the surprise visit of the departmental officers this factory was found to be carrying on manufacturing activities but the appellants’ record showed absence of manufacture over a considerable period. The delivery of snuff the buyers did not realise that the goods supplied were not duty paid. The quantity of illicit removal has also been determined on experiments and a receipt of 4,000 kgs. of un-manufactured tobacco without entry in the prescribed records has also been unearthed.
Considering the evidence discussed in the order of the Collector, there was sufficient basis for the orders passed and the appellants have not been able to refute any of the findings.”
Hence the present appeal which was originally filed as a Revision Application and transferred to the Tribunal for disposal.
6. We heard A.F. Patel,Adv.. Patel reiterated the contentions made in the Revision Application and explained the same. He submitted that the Board did not apply their mind when passing the impugned Orders. He pointed out that the Board referred to a statement recorded from Tejsingh J. Rao and his father”. The learned Adv. submitted that the father of Tejsingh J. Rao died long before the proceedings commenced. Therefore, there could be no statement from the “father”. He further submitted that though the appellants advanced a number of arguments before the Board not a single one has been examined.
7. With reference to the Collector’s orders the learned Counsel submitted that the Collector proceeded on assumption and presumption and did not make enquiries into the various claims and submissions made by the appellants. He expressed surprise that the other party to the proceedings who was alleged to have supplied 4,000 kgs. of non-duty-paid tobacco to the appellants was penalised only Rs.2,000/- whereas the appellants were not only penalised but are also asked to pay extremely heavy amounts of duty. He pleaded that the appellants filed a reply dated 14-10-1980 and requested that the claims therein be investigated by the department. Instead of doing so the Collector fixed a hearing on 2-1-1981. The appellants thereafter again submitted an application on 10-1-1981 requesting for an enquiry through independent officers and thereafter to fix hearing. But the Collector did not give such a hearing and adjudicated the case Ex-parte under his order dated 19-2-1985. The learned Counsel submitted that this ex-parte decision is a breach of the principles of natural justice. The learned Counsel also averred that the appellants were not allowed to know that defence M/s. Patel Fulabhai Jivabhai & Sons put on to the show cause notice. He argued that the appellants have given a full explanation with their reply dated 14-10-1980 as to how snuff weighing 30,279.4 kgs. was manufactured. He denied all allegations.
8. S.P. Prabhu, the learned JDR opposing the arguments referred extensively to the Collector’s order and submitted that his order was based on solid evidence.
9. We have considered the arguments of both sides. As submitted by the appellant the impugned order passed by the Board does not contain any detailed discussions of the ground raised by the appellants. But the Board is no more an appellate authority. We, therefore, look into the Collector’s order wherever necessary.
10. Before we proceed we refer to the vehement and repeated assertions made by the appellants both in the Revision Application and before us during the course of hearing, that the Collector did not conduct investigations. The appellants seem to be under the impression that the Collector is so bound to make investigations on the points raised by them. This does not seem to be correct position. The appellants consider that they had some evidence to disprove the allegations made against them. It was their duty and right to present the evidence during the course of adjudication. If they thought that some Central Excise Officers could give evidence within that would help them they should have requested the Collector to summon these officers for cross examination. They could have taken similar action in respect of other witnesses on whom they wanted to rely and produced them for examination. Merely making claims in reply to the show cause notice and then expecting that the Collector would enquire lead to a situation in which ex-parte decision was taken by the Collector.
11. The validity of the ex-parte action taken by the Collector, has, therefore to be examined. We note that the Collector himself recorded the circumstances as follows:
“The firm was also allowed sufficient time to file reply to the Show Cause Notice. It was also given more than one opportunity to carry out inspection of the document relied upon. After protected correspondence, the firm finally filed a reply to the Notice under his letter dated 23-11-1980. While referred to the statement given by one of the partners on 22-3-1979 before the investigation Officer, the main contentions raised by the firm in his reply is that is issued bill dated 3-11-1977 in favour of the manufacturer simply for the purpose of enabling him to adjust the stock of tobacco with him and that, in reality no Tobacco was supplied by him under cover of that bill. In the premises, it is argued by it that it was not guilty of breach of Rule 32; nor had it committed any offence of the nature as contemplated in Rule No. 151.
The case was first fixed for hearing for 2-1-1981. Neither of the two parties turned up for hearing. The manufacturers, under his Telegram dated 1-1-1981 requested for adjournment, stating that the application follows. No ground in support of the request for adjournment, was mentioned in the manufacturer’s telegram; nor the promised application followed it. The manufacturer abstained from hearing without assigning any reason.
The case was next fixed for hearing for 12-1-1981. Neither of the Two parties to the case appeared for hearing on the second occasion, on 12-1-1981. However the manufacturer addressed a further reply under letter dated 10-1-1981, the date of hearing fixed on the second occasion while offering further explanation in support of his case in his letter dated 10-1-1981, the manufacturer volunteered to give further explanation if the adjudical authority was not satisfied with the one given by him earlier. The manufacturer further stated with reference to the bill dated 3-11-1977 issued by the firm in his favour, and not dated 10-11-1977 erroneously stated by him that no one issued any bill for unaccounted goods and nor would credit bill for unaccounted goods, in the account books. It is argued by him that the said bill has been credited by him in his books but the Tobacco covered by it had not been received by him. In his letter dated 10-1-1981 the manufacturer has mentioned about the extent of biripatty derived during processing in Ware-Houses and’that obtained in .L2 premises and about the different losses observed in L2 and L5 premises, arguing that despite wide difference between the two, statutory accounts in relating thereto had been accepted by the Department.”
12. As mentioned earlier the appellants seem to have been totally under the belief that the Collector would conduct enquiry and communicate to them the results and then inform them about personal hearing. This was not a correct expectation.
13. There is no evidence to show that the Collector put the appellants on a final notice rejecting the request for further investigation and giving them an ultimatum about the personal hearing. The material test of observance of the principles of natural justice is that a matter should be decided after giving not only an opportunity for personal hearing; such an opportunity should be manifestly a liberal and unambiguous opportunity for being heard. This should have been done especially when, very clearly, the appellants were labouring under a misappreciation of the process of adjudication. Many facts were there raising questions to be examined by the Adjudicating Officer. A just and fair decision would not have been possible without the appellants being given a very practical and actual opportunity to produce their evidence. No doubt if they still failed to avail of an opportunity inspite of a warning and inspite of getting a chance they have to take the consequences. We feel that in this case the fault of not appearing for the personal hearing cannot be placed entirely on the appellants. Whatever be the position, the cause of justice suffered as the decision against the appellants was taken without their advancing evidence and arguments in their own defence. The many claims of the appellants were decided without their participation. They were, as a result, asked to pay huge amounts which were adjudicated in absentia.
14. For this reason we cannot sustain the impugned orders. We set aside the two orders in so far as they relate to the appellants. We direct that the proceedings should continue from the stage of the show cause notice. The Collector should now give the appellants an opportunity to be heard. He should, as provided by law, allow cross examination and examination of witnesses and presentation of evidence. If inspite of a reasonable and liberal opportunity being given the appellants do not appear and pur foward their defence the collector may then pass such order as he deems fit.
15. The appeal is thus allowed by remand.