ORDER
Jyoti Balasundaram, Vice-President
1. Vide the impugned order, the Commissioner of Central Excise, Mumbai, has confirmed a duty demand of Rs. 51,88,978.04 under Section 11A(2) of the Act read with the proviso to Sub-section (1) and Rule 9(2) of the Central Excise Rules and imposed a penalty of Rs. 30,00,000/- in terms of Rule 173Q(1) of the Central Excise Rules on the appellants herein, treating them as manufacturers; of processed manmade fabrics and holding that the fabrics had been undervalued by them.
2. None appears for the appellants in spite of notice; hence we heard the learned DR and perused the records.
3. We find that the Commissioner has given detailed reasonings as to why he holds Sharda Textile Mills India Ltd., the appellants herein, to be the manufacturers. He has found that the appellants played a pivotal and comprehensive role in the matter of getting grey fabrics including grey fabrics with the word “Sharda” on the selvedges, manufactured to their specifications and design and under supervision by their representatives and that the appellants got the fabrics processed at processing houses chosen by them. He has found that the entire gamut of all such operations was directed, controlled, contrived and executed by the appellants in such a manner as to funnel all processed fabrics ultimately to the appellants. He has also found that the prices shown for the stages prior to the goods reaching them were manipulated. He has also found that weavers of grey fabrics were forced to give bills for processed fabrics, even when they had manufactured and supplied only grey fabrics. He has further held that the appellants’ dealings with other units were dealings with dummy units and they were not based purely on commercial considerations but were contrived so as to camouflage the reality behind the transactions. He has held that the manipulations in respect of processing and under valuation culminated only at one single point, i.e. with the appellants who sold the goods in open market for the first time at the real wholesale normal, price which was much higher than that arranged to be declared to the central excise authorities. Thus the appellants wangled the illicit benefit of evading duty by a substantial difference in value. In the appeal filed before us, we find that the appellants have raised two-fold contentions – one, that the order suffers from the vice of contravention of the principles of natural justice and two, that the appellants neither supplied grey fabrics to M/s. Sharda Synthetics Bombay Pvt. Ltd. nor got any fabrics processed on their behalf and, therefore, they could not have been treated as the manufacturers of the processed fabrics. We note that the Commissioner had extended opportunities to the appellants of inspecting and taking copies of documents required by them, that the appellants had taken copies of the required documents and that several opportunities of personal hearing were extended, but the appellants neither filed a reply to the show cause notice nor chose to appear for hearing before the adjudicating authority. Hence there is no substance in their plea regarding violation of the principles of natural justice.
4. On merits, as already set out above, the Commissioner has gone through the entire scheme set up by the appellants, to hold that they had masterminded the operation of getting the fabrics processed and undervaluing them right from the stages of grey fabrics. Therefore, we see no substance in the plea that they cannot be treated as the manufacturers.
5. In the result, we hold that the evidence on record clearly shows that it is the appellants who were manufacturers of processed fabrics and that since they had undervalued the fabrics, the differential duty demand confirmed against them is sustainable. The appellants’ reliance on the decision of the Supreme Court in Ujagar Prints 1989 (39) E.L.T. 493 (S.C.) does not help their cause as that decision related to a job worker who has been independently processing the goods. In the present case, the Commissioner relied on the decision of the Supreme Court reported in AIR 1969 SC 499/501 in the case of CST v. Sukhdev wherein the Hon’ble Supreme Court held that a manufacturer is a person “by whom or under whose direction and control, articles or materials are made.” The evidence in the present case suggests that the appellants are the real manufacturers under whose direction and control, the goods were processed.
6. We, therefore, uphold the duty demand confirmed against the appellants. However, confiscation of seized manmade fabrics and the penalty imposed on the appellants is set aside in the light of the judgment of the Hon’ble Delhi High Court in Pioneer Silk Mills (P) Ltd. v. UOI which has also been upheld by the Apex Court.
7. In the result, the appeal is partly allowed as above.