ORDER
K.K. Agarwal, Member (T)
1. These are two appeals against two orders of Commissioner. Since the orders in both the appeals arise out of the same set of facts, the same are being decided through a common order.
2. The brief facts of the case are that the appellants firm runs process house wherein man made fabrics are produced. The process like bleaching, dyeing, printing and finishing are undertaken by the appellants on grey man made fabrics supplied by various traders.
3. On the basis of intelligence gathered some preventive officers of the department visited appellants’ premises and seized a tempo loaded with 97 pieces of processed man made fabrics measuring 8017.50 meters. This fabric was seized as their description and quantity did not tally with the accompaning gate passes and there were certain discrepancies in the duplicate and triplicate copy of the gate passes. The officers also seized 6072 linear meters of man made furies lying in the premises in semi-finished condition On the ground that it was excess stock i.e. fabrics which were found over and above the fabrics entered in the statutory records.
4. The officers also seized various documents from the factory premises and several pages written by hand covering the period May 1989 to August 1989, November 89, December 89, April 91 and May 91 were put in one file which numbered as file No. 73 in the panchnama dated 20.05.1991.
5. They were thereafter issued a show cause notice alleging that file No. 73 contained details of fabrics processed by four labour contractors for the above referred period. Names of all the labour contractors in question are as under:
(1) Shri Ayub Abdulgani Sheikh
(2) Shri Bhimrao Ahire Fakira
(3) Shri Maruti Digambar Patil
(4) Shri Rajan Shukla
Based on the details of fabric process as contained in file No. 73 a show cause notice was issued demanding duty amounting to Rs. 1,70,86,920.65 which was cleared without payment of duty and proposed confiscation of the fabrics seized and sought to impose penalty on various persons. The show cause notice was adjudicated by the Collector of Central Excise demanding duty of Rs. 1,21,01,153.41 from the appellants and he confiscated the seized fabrics and the Tempo and imposed penalties on the appellants and other partners etc.
6. It was submitted by the learned advocate for the appellants that the entire case is based on the basis of entries made in the hand written pages placed in filed No. 73 which in turn refers to the fabrics processed by the four sub-contractors referred to above. These subcontractors have in their respective statement stated that their worker were processing fabrics on tables and one Shri Rana, clerk of the factory was writing file No. 73. Since the entire case was based upon the entries made in File No. 73 which referred to the fabrics processed by the above four contractors and since File No. 73 was written by Shri Rana, they have requested for cross examination of all these four Sub-contractors alongwith Shri Rana. Their request was however rejected and the Commissioner has stated that once the copies of their statement have been supplied to them, they can comment on the same. On rejection of their request of cross objection, they have filed an affidavit of these five persons in which these four contractors have clarified that they were working as sub-contractor of the principal contractors like Vijaylaxmi Printers Bhanu Silk Mills and Dhaneshwar Printers etc. and they were not getting payment from the appellant firm. The payment was made to them by the principal contractors.
7. Shri Rana in his affidavit explained that the above referred persons were sub-contractors of the main contractors, that file No. 73 contained the record of lots of fabrics which were processed at different stages, that a lot of fabrics was noted in these papers on each stage like bleaching, dyeing, printing etc. and therefore the details were not regarding fresh lots of fabric and that he had explained these facts to the officers when his statement was recorded.
8. In their written submissions before the Commissioner they had emphasized the true nature of file No. 73. It was also submitted to the Commissioner that it has been held by various authorities that in the absence of evidence regarding procurement and use of material like dyes, chemicals etc., evidence regarding transportation agencies and recipient of the illicitly removed fabrics, demand for the alleged clandestine removal solely on writing/jotting in files/note books on mere oral statements was not sustainable.
9. The Commissioner in his order has conceded that except for the statements and contents of file No. 73, there was no other evidence for establishing clandestine removal. Therefore, once the demand is based only on the statements and contents of file No. 73, it was crucial that cross examination of the persons whose statements have been recorded and who has written file No. 73 should have been allowed as it is only these persons who could have explained the nature of entries made in those files and whether there was multi-entries in respect of the same fabrics or not. Moreso when the customers whose name and addresses were available were also not contacted by the department. Without testing veracity of statement of these persons, no reliance could have been placed on these statements. Further, it is the case of the department that the labourers of sub-contractors namely Bhimrao Fakira, Maruti Patil and Rajan Shukla were working on tables – that is to say – they were doing hand processes including hand printing fabrics on auto machines. During 1988-89 and 1990-91, the man made fabrics were chargeable to nil rate of duty under the Tariff itself if no process with the aid of power was undertaken thereon. For the year 1991 and thereafter, by virtue of Notification No. 51/91 dated 25.07.1991 fabrics processed without the use of machines were chargeable to nil rate of duty. Therefore, even if it is admitted that the fabrics as detailed in file No. 73 were processed in the appellants’ process house, the fabrics attributable to labourers of Bhimrao Fakira, Maruti Patil and Rajan Shukla were chargeable to nil rate of duty and therefore, no duty could have been demanded on these fabrics. Further, the quantity of fabrics that is alleged to have been removed clandestinely was beyond the production capacity of the machines installed by the appellants.
10. In view of this, it was submitted that matter needs to be remanded back to the Commissioner with a directions that the cross examination of the four sub-contractors and Shri Rana should be allowed to bring out the correct facts and thereafter a reasoned order should be passed.
11. As regards the second case, it was submitted that another show cause notice was issued to them after order-in-original was issued in respect of the first case. This case also refers to the same facts but has been issued on the basis of the majuri bills raised by the principal contractors alleging that majuri charges for processing 84,03,368 meters of fabrics were paid by the appellants to these contractors. Commissioner vide his order-in-original has confirmed the duty demand of Rs. 1,77,80,128/-. The order was passed mainly on four grounds i.e. (1) names of contractor in the ease and names of the contractors in the second case are different and hence both the proceedings were different from each other.
(2) Payments made by the appellants to these contractors was admitted by the appellant and therefore no other evidence was required for demanding the duty.
(3) Since payment of majuri bills by the appellant was admitted, there was no need to contact any customers for establishing whether they received any fabrics from the appellants or not.
(4) The present proceedings were new and therefore the time gap between previous proceedings and these proceedings was not relevant and the extended period of limitation was available for these proceedings also.
12. It was submitted that except names of contractors/subcontractors, all the other facts like period involved, goods involved, customers involved etc. have been the same. Again issuing of second show cause notice on 26.11.1993 after passing order on 10.11.1993 on the first notice is totally motivated as the names of principal contractors were dis-closed in the previous proceedings also. The appellants’ explanation that they had engaged main contractors who had engaged the sub-contractors and therefore, the main contractors and the sub-contractors were with regard to the same fabrics has been rejected without any justifiable reason. The fact that there was no payment by the appellant to the sub-contractor was conveniently ignored in the first adjudication and the second adjudication is made against the appellant only on the ground that the appellant had admitted the payment of majuri to the main contractors.
13. Except payment by the appellant to the main contractors regarding job charges, there is admittedly no evidence like availability of grey fabrics, the other material like dyes, chemical etc., involvement of transporter for removing goods and the customer who might have received the fabrics.
14. The appellant has cleared 91,65,991.75 meters of fabrics on payment of duty during the period in question, the quantity of fabrics allegedly cleared in the first proceedings is 75,20,716.50 L. Meters and the quantity alleged to have been cleared in this case is 84,03,368 meters those totaling 25090075.25 for entire period from November 1983 to May 1991. Such enormous quantity of fabrics could not have been processed by the appellant considering the machinery installed, number of working days during the entire period, No. of workers employed etc., evidence regarding which were produced in those proceeding.
15. It was accordingly submitted that in this case also same subcontractor and contractors are involved and also arises out of the same facts and therefore the findings in the first case will have repercussion on the second case also and therefore this matter also needs to be remanded back to the Commissioner.
16. We have considered the submissions. We find that the order in the first case is admittedly based on the statement of sub-contractors and the contents of file No. 73 and there is no other evidence regarding procurement of raw material, processing material like dies and chemicals, engagement of transporters for delivery of alleged clandestine removal of goods and statement of customers who have received so called alleged contraband goods. In such circumstances cross examination of the persons on whose statement namely four subcontractors and Shri Rana who has maintained the file No. 73, the entire demand is based was crucial to determination of the correct, facts of the case and the denial of the same has certainly resulted in the denial of principle, of natural justice.
17. We, accordingly, remand the matter back to the Commissioner with a direction to allow cross examination of the four sub-contractors and Shri Rana with a liberty to the appellants to make further submissions arising out of cross examination of the persons and to pass a reasoned order thereafter. Since the second case is also arising out of the same facts and the findings in the first case will have repercussion on the second case also, the same is also remanded back to the Commissioner to decide the issue afresh after deciding the first case.
18. Both the appeals are allowed by way of remand.
(Pronounced in Court)