ORDER
Shri Jeet Ram Kait
1. To hear these appeals, the applicant M/s. Anjaneya Steel Rolling Mills is required to pre-deposit duty demand of Rs.27,04,019/- imposed under Rule 9(2) read with Sub Section (1) of Section 11A of Central Excise Act, 1944 besides equal amount of penalty under Section 11Ac and interest under Section 11AB of the CE Act 1944 imposed by the Commissioner of Central Excise Trichy vide his Order-in-Original No.20/2000 dated 28.9.2000 for alleged clandestine manufacture and clearance of M.S. Rods without payment of duty. By the same order he has also imposed penalty of Rs.50,000/- each of Shri G.Odayappan, Managing Partner if the firm Shri S.A. Premkumar (Director/Tech.) of M/s.Elango Industries Ltd. and Shri S. Elangovan, MD of M/s. Elango Industries Ltd. However no appeals have been field in respect of Shri Premkumar and S.Elangovan.
2. The facts in these appeals are that the appellants were issued with show cause notice for recovery of duty on alleged clandestine manufacture and clearance of MS Rods/Angles made during 1995-96 out of MS Ingots allegedly manufactured and cleared by M/s. Elango Industries Ltd., Karaikal, following the search operations made by officers of Anti Evasion Wing of Central Excise unit, Chennai on several factory premises including the appellants firm. Various documents including statutory and private records showing receipt of scrap and disposal of Ingots were recovered under Mahazar dated 6.5.97. The documents recovered from various places were perused and evidences were established relating to removals of both accounted and unaccounted MS Ingots from the factory. The Commissioner, after examining all the records and statements of various persons passed and also after considering the submissions made during the hearing, has come to a conclusion that M/s. Anjenaya Steel Rolling Mills were purchasing Steel Ingots from M/s. Elangovan Industries Ltd. without bills and without payment of duty and they manufactured M.S. Road and angles weighing 1434.402 MTs. Which were also cleared without payment of duty and hence he passed the impugned order.
3. Ld. Counsel for the appellants submits that principles of natural justice has been violated by the Commissioner in as much as he has no t relied on the deposition made by three persons viz. S/Shri Odyappan, Mohammed Nazeer and Saifudeen during the cross examination. He also submits that they were not allowed to cross-examine the persons whose statements have been relied upon by the Commissioner to confirm the demand. He further submits that by relying on an order passed against M/s. Elango Industries Ltd. which was passed after the notice was issued, the Commissioner has gone beyond the ground stake in the notice. Ld. Counsel further submits that not only the Commissioner had not granted abatement of duty from cum-duty price in terms of Larger Bench decision in the case of Sri Chakra Tyres, but also the Commissioner has failed to notice that Sec.11AC was introduced in the statute book only from 28.9.96 and no penalty equal to the duty amount could be imposed under this section for alleged clearances effected before this date. Similarly, he submits that Sec.11AB was introduced from 28.9.96 only and hence no interest could be demanded on the duty demanded. He further pleaded that hey are facing acute financial stringency in view of the fact the applicants; unit has since been closed and had surrendered the excise registration due to great loss. Hence, he submits that they have strong prima facie case and seeks for total waiver of duty and penalty besides alternatively praying for remand of the case for de novo adjudication in view of violation of principles of natural justice in not giving a finding on depositions of certain persons whose statements were not relied upon and in not affording opportunities for cross-examination of other persons whose statements were relied upon.
4. Heard Ld. D.R. who reiterates the departmental contention and submits that the department has gathered sufficient evidence. He submitted that the Commissioner has given a detailed order narrating all the aspects and established beyond doubt about the receipt of MS Rods manufacturing of Ingots and clearing the same to several agencies without payment of duty. Throughout the proceedings the assessee has not explained properly about the receipt of the said ingots. Neither the exact quantum was entered in the statutory records nor M.S. Rods/Angles manufactured out of the total quantity a was brought on record. The fact remains that they had been clearing the M.S. Rods and angles without payment of duty to M/s. Super Steels Trichy and M/s. MSR Steel Agencies, Trichy which has proved the fact that they had manufactured M.S. Rods and angles weighing 1434.402 MTs. Moreover, the receipt of the above M.S. Rods and Angle shave been admitted by the Managing Partner of both M/s. Super Steels and M/S. MSR Steel Agencies Trichy, Ld. D.R. submitted that Managing Partner of the appellant firm Shri G.Odayapan in his statement dated 6.5.97 had clearly admitted that he had received M.S. Ingots without proper documents. He had admitted that he had received non duty paid ingots in two ways viz. by way of dummy invoices and by way of loading extra quantity of ingots over and above the invoiced quantity and they had manufactured without accentual of M.S.Rods M.S. Rounds Bars and Angles out of unaccounted Ingots and cleared the same without paying excise duty to M/s. Super Steels Trichy and M/s. MSR Steel Agencies , Trichy. Therefore he submitted that in order to safeguard the Revenue interest, the appellants should be asked to pre deposit the entire amount before the appeal is heard.
5. Since prime facie, the case appears to be in favour of the appellants and in view of the fact that there is violation f principles of natural justice we grant waiver of the duty, penalty and interest, and we take up the appeals themselves for disposal.
6. On a careful consideration of the submission and on perusal of the records, we are of the considered opinion that the Commissioner has not given his findings on the deposition made by three persons viz. S/Shri Odyappan, Mohammed Nazeer and Saifudeen who were cross-examined. Similarly the appellants were not allowed to cross-examine the persons whose statements have been relied upon by the Commissioner to confirm the demands. The appellants have also stated that by relying on an order passed against M/s. Ilango Industries Ltd. which was passed after the notice was issued, the Commissioner has gone beyond the grounds and scope of the show cause notice. We also notice that the Commissioner has not granted abatement of duty from Cum-duty price in terms of Large Bench decision rendered in the case o f Sri Chakra Tyres as reported in 1999 (108) ELT 361 wherein the 5 Member bench have laid down the law that in terms of Section 4(4) (ii) of Central Excise Act abatement from Cum-duty price is required to be given to the assessees even in respect of clearances made without payment of duty. We further notice that Section 11AC and 11AB were introduced in the statute book only from 28.9.96, whereas the demand pertain to the period from March 95 to August 96. Therefore Section 11AB and AC were not applicable and the mandatory penalty to the extent of duty under Section 11 AC and interest under Section 11AB cannot be imposed on the appellants. Further since the principles of natural justice has been violated by the Commissioner by denying cross-examination of the persons whose statements have been relied upon and also in the absence of a finding by the Commissioner on the deposition made by S/Shir Odyappan, Mohammed Nazeer and saifudeen, we are of the considered opinion that the Commissioner has not applied his mind properly and has not passed a peaking order n various points urged by the appellants before him. Hence the matter is required to be remanded to the original authority for de novo consideration. The appellants shall be at liberty to submits any further evidence in support of their defence and the Commissioner shall afford the appellants ample opportunity including cross-examination of the persons whose cross-examination was denied by him to enable the appellants to put their defence effectively and thereafter pass a speaking order. Thus the appals succeed by way of remand.
(Pronounced in open court on 13/07/2001)