J.H. Joglekar, Member (T)
1. The appellant processed grey fabrics received from traders on job work basis. On 5-1-1989 a vehicle containing goods cleared from the premises was intercepted and was brought back to the factory. Discrepancies were noted in the original and other copies of the gate passes covering the consignment. Examination of gate passes under which goods had earlier been removed showed that while the first copy was fully completed the other copies were left blank. The fabrics totally valued at Rs. 4,04,124/- were seized along with the tempo. The Excise Clerk admitted that the modus of leaving the other copy blank was to enable evasion of duty and that it was done at the instance of Champalal Chopra, Director.
2. Investigations showed number of discrepancies in the lot registers which the Excise Clerk admitted were done deliberately under the instructions of Champalal Chopra. Chopra in his statement dated 9-1-1989 accepted the large-scale variations, erasions and scoring out in a number of registers and attempt to preparing fake invoices and gate passes and also offered to pay the duty leviable thereon. Thereafter officers contacted the octroi naka which kept detailed entries of the grey fabrics received by the present appellant and also the processed goods sent out by them and took extract from the said register. Three statements were made therefrom and were annexed to the show cause notice. Statement at Annexure 'A' showed manmade fabrics entered in the lot register but latter erased but where the entries were found in the octroi register. The statement at Annexure 'B' showed the entries in the octroi register for which no corresponding entries existed at all in the excise register. The statement at Annexure 'C' recorded similar details with reference to the entries made in the lot register of the assessees. Thereafter the statements of merchant manufacturers were recorded. They were shown the statement at Annexure 'A'. A number of them accepted the fact of receipt of processed fabrics for which appropriate duty had not been paid. The statement of Sunderlal Chopra, another Director was also recorded. He was shown the annexures and the supporting documents. As regards the erasers in the register he claimed that the Excise Clerk had done the same. He also made the claim that some grey fabrics were not actually processed but were returned as such. He was specifically asked about 62 missing grey challans in which case he had claimed to have returned the grey goods back to the trad- ers. He was asked whether he could produce the octroi documents to cover the return to which he replied in the negative. In a later statement Champalal Chopra's earlier admissions as to evasion were reiterated. He was shown certain statements of the traders indicating evasion of duty and he signed the statement made by them but professed ignorance as to why the traders had chosen to pay the duty. He was shown a number of challans indicating receipt of grey sent by the merchant manufacturers but accepted physical receipt only in a few cases and denied that the grey fabrics were received by them in the case of 37 challans. On later occasions also being shown the lack of accounting he gave similar replies.
3. Show cause notices were issued alleging evasion of duty, liability to confiscation of the seized goods and liability to penalty on M/s. Suman Silk Mills and Suman Silk Mills (Depot) as well as the traders who had sent the grey fabrics for processing. After hearing the manufacturers and traders the Collector of Central Excise, Vadodara passed orders. He confiscated the seized manmade fabrics and the tempo but permitted their redemption on payment of fine. He confirmed duty of Rs. 20,36,114.47 and appropriated the amount of Rs. 4,44,561-07 paid by M/s. Suman Silk Mills Pvt. Ltd. on behalf of certain traders. He imposed penalties on the driver of the tempo, on M/s. Suman Silk Mills Pvt. Ltd., as well as on Sales Depot of M/s. Suman Silk Mills. The processing house and the sales depot have filed these appeals against this order.
4. Shri Mayur Shroff arguing for the appellants claimed that at the material time the law did not enable the Central Excise authorities to confiscate any goods or to impose any penalties or fines. In this respect he relied upon the judgment of the Delhi High Court in the case of Pioneer Silk Mills v. UOI - 1995 (80) E.L.T. 507. He submitted that the assessees had time and again requested for copies of the octroi registers and also for cross-examination of the persons who written the register. He stated that in denying the inspection as well as the cross-examination the Commissioner had violated the principles of natural justice and on this ground alone the impugned order is liable to set aside. He referred to the annexures to the show cause notice and showed that there were a number of discrepancies. He showed that in a number of cases the goods were shown to have been cleared from the factory at a date earlier than the receipt of these goods in the factory. In a number of entries, the challan numbers had not been shown for the clearances. He stated that in some cases the vehicle numbers were shown but not in all cases. He accepted that the Collector on being shown discrepancies had reduced the duty for the obvious discrepancies but that a number of similar discrepancies existed where he had not paid sufficient attention. He claimed that the Collector could have granted for the reduction for the demand.
5. On point of law Shri Shroff referred to Supreme Court judgment reported in AIR 1977 Supreme Court 1627. In this case the Hon'ble Supreme Court was dealing with the provisions in the Sales Tax Act which enabled the officers to make best judgment assessment where no return was filed by the dealer. The law provided an opportunity to be given to the trader to present his case. The Court observed that the opportunity should be given to them to present the return and also to prove the correctness or completeness of the return. The Court observed that this right was conferred upon the dealer to enable him to examine witnesses and also to cross-examine the department's witnesses. In the case before the Hon'ble Supreme Court the Sales Tax officers had not called for cross-examine certain traders on whose evidence reliance was placed. On the ground that natural justice had been denied the Court dismissed the appeal of the Government of Kerala. Counsel also relied upon the judgment of the Supreme Court in the case of Sounds N. Images v. CC [2000 (117) E.L.T. 538 (S.C.) = 2000 (38) RLT 242]. He laid emphasis on the Tribunal judgment reported in 2000 (40) RLT 1077 in the case of CCE, Chandigarh v. Dashmesh Casting (P) Ltd. It holds that the allegations based on octroi records without any evidence was not sufficient to establish the evasion. Claiming paucity of hard evidence he relied upon the Tribunal judgment in the case of Laxmi Engg. Works v. CCE [2002 (139) E.L.T. 573 (T) = 2001 47 RLT 302]. He referred to the following judgment of the Tribunal in canvassing the point of denial of natural justice, (a) Anjaneya Steel Rolling Mills v. CCE, Trichy [2002 (140) E.L.T. 241 (T) = 2001 (47) RLT 69]; and (b) Vijay Enterprises v. CCE [2002 (140) E.L.T. 395 (T) = 2001 (47) RLT 199].
6. Shri M.H. Shaikh appearing for the Revenue supported the Collector's order.
7. We have carefully considered the rival submissions and have seen the case law.
8. The judgment of the Delhi High Court in the case of Pioneer Silk Mills Pvt. Ltd. v. UOI had held that in the law relating to collection of additional duties of excise there were no provisions to confiscate any goods or to impose penalties on the persons who rendered such goods so liable. Subsequently this lacuna in the law was corrected by suitable amendment. However, during the period prior to the amendment, this law applied and has been followed by all benches of the Tribunal. Reference applications made in relation to the judgments which followed such law were also dismissed. As far as the orders of confiscation, imposition of redemption fine and penalties are concerned the appeals succeed. The orders of confiscation and of imposition of penalty are set aside.
9. As regards the confirmation of duty the learned Counsel had assailed the very basis of the demand i.e., the entries in the octroi register. Shri Shroff referring to the cited judgments claimed that the inspection of the register and opportunity to cross-examination of the authors thereof was mandatorily to be given,
10. We have considered the submissions. We find that the octroi register is not one of the documents seized by the Excise authorities. It is a register maintained by the local government authority under their law from which the Excise authorities have merely taken extracts relating to the present appellants' activities. Since the register was neither seized by the Commissioner nor was authored by any of his officers, the continued request by the assessees for inspection thereof at the hands of the excise was without any basis.
11. During the hearing the Bench asked Shri Shroff whether the assessees had at any time approached the octroi authorities for permission to examine the concerned register. Shri Shroff did not give a direct answer but claimed that octroi authorities may not have accepted that request. We are unable to accept this defence. It is very clearly shown that the assessees did not make any attempt at all to verify the entries on which the allegations of evasion was made against them.
12. As regards the cross-examination of authors of the said register also, we observe that they were not staff of the Excise Department, nor of the assessees. In fact the identity of those persons would be hard to establish. In a town there are number of entry points and number of octroi nakas. Ordinarily the staff would rotate since nakas remain open at all the hours of day and night. Therefore it would be well nigh possible to determine as to which entry was made by which individual. In the circumstances there would be no question of offering for cross-examination of any octroi officer.
13. In the case of CCE v. Dashmesh Castings (P) Ltd. the Tribunal had held that mere existence of octroi records without any other evidence could not establish the case of the Revenue. This judgment does not apply in the present case in the face of corroborating evidences. Shri Patel, Excise Clerk admitted large-scale erasions in the statutory books of accounts. He also admitted that not all the details were incorporated in all the copies of the gate passes. He conceded that this was done to enable the unit to evade the duty. He further claimed that this was done at the instance of Shri Champalal Chopra, the Director. Shri Champalal Chopra in his statement and on perusal of the records accepted large-scale erasions but blamed the Excise Clerk therefor.
14. Further corroboration was made by a number of traders who had sent grey fabrics and had received processed fabrics without payment of duty. The evasion was quantified traderwise and the ascertained amount of duty evaded was willingly and without demur paid by M/s. Suman Silk Mills Pvt. Ltd. The details of these eight traders are available in paragraphs 21 to 27 of the Collector's order.
15. We thus find that the octroi records were not the sole evidence but that there was sufficient corroboration available. The judgment cited by the learned Counsel in the case of CCE v. Dashmesh Castings (P) Ltd. as also Laxmi Engg. Works v. CCE becomes not relevant.
16. As regards the judgment of the Supreme Court we find that the facts as brought out in the judgment are entirely different from those before us. As we have observed above it was not in the hands of the Collector to supply the octroi records to the appellants because they were not his documents nor could he compel the officers who had written the register especially in the absence of their identity to submit themselves for cross-examination.
17. Counsel also made a grievance on the ground that cross-examination of certain dealers were not made available. We have perused the recent judgments of the Tribunal on the issue of cross-examination in the judgment in the case of Gobind Lal v. CC - 2000 (117) E.L.T. 515, the Tribunal held that where the statements were confessional and where the witnesses were not given for cross-examination principles of natural justice could not be held to have been violated. In the case of Liyakat Shah v. CCE - 2000 (120) E.L.T. 556, the Tribunal has held that cross-examination was not a mandatory procedure to be allowed in all cases. Same view was held in the case of Poddar Tyres (Pvt.) Ltd. v. CCE, Chandigarh - 2000 (126) E.L.T. 737.
18. The judgment in the case of Sounds N. Images v. CC (supra) is of no relevance to the proceedings.
19. On the submissions of the quantum of duty, a number of arguments were made by the Counsel. It was claimed that various discrepancies in the statement were pointed out to the learned Collector. The Collector had granted redemption in the quantum of duty to bo confirmed in terms of para 17 of his order. Counsel, however, contends and shows that there was scope for further reduction. This argument is accepted by us.
20. On the basis of our analysis above we make the following order,
(i) The orders of imposition of penalty on both the appellants are set aside.
(ii) The orders of confiscation of goods and of imposition of fine in lieu of confiscation thereof are set aside.
(iii) While upholding the belief of the Collector that duty was evaded by the appellants the matter is remanded for fresh quantification. Counsel shall draw up a statement of discrepancies in the annexures whereupon the quantification of the duty evaded would be amended. The appropriate jurisdictional authority shall consider this and give his finding.
21. The appeals are allowed partly.