Customs, Excise and Gold Tribunal - Delhi
Eros Metal Works (P) Ltd. vs Collector Of C. Ex. on 30 April, 1987
Equivalent citations: 1989(43)ELT361(TRI-DEL)
ORDER
1. Show cause notice dated 23-8-1982 was issued by the Asstt. Collector (Technical) of the Central Excise Headquarters Office, Nagpur to the appellants M/s. Eros Metal Works (P) Ltd. alleging contraventions of various provisions of law relating to payment of excise duty. The substance of the allegations was that the appellants, over a course of years, were clearing, without payment of duty, steel furniture manufactured by them with the aid of power under the guise that these had been manufactured without the aid of power and were therefore not liable for payment of excise duty. It was further alleged that several amounts were mentioned in the bills as towards packing, forwarding and installation charges but that the same had not been disclosed in the gate passes. It was also alleged that no separate production records were being kept for the power and non-power sections in order to screen the production in the power unit from demand from payment of excise duty. Statements of various persons recorded during investigation were relied on in support of these allegations as also contents of several records and registers seized during investigation. It was alleged that the machinery owned by the appellants for production of steel furniture without the aid of power had been transferred to a new unit floated in 1978 by name M/s. Orient Metal Industries and, therefore, after 1978 the appellants owned no such machinery and hence did not produce any steel furniture thereafter without the aid of power. It was mentioned, on the basis of the said allegations, that the appellants were not entitled to benefit of exemption from payment of duty in respect of the articles manufactured by them, and which were liable for duty in the normal course, since the value of their clearances during the previous 5 years was in excess of the limit prescribed in the respective exemption notifications and thus huge revenue had been evaded. The quantum of revenue so evaded was computed at Rs. 40,08,647.03 P. The appellants were directed to show cause why the said duty should not be recovered from them under Rule 9(2) of the Central Excise Rules, why their land, building, plant and machinery should not be confiscated and why penalty should not be imposed. Subsequently on 27-9-1982 another show cause notice was issued in continuation of the earlier notice mentioning that during the period April, 1982 to August, 1982 goods valued at Rs. 12,75,061.56 P had been cleared without payment of duty and duty amounting to Rs. 3,34,703.67 P was to be recovered under Rule 9(2) of the Central Excise Rules. The appellants by various letters were requesting the Department to permit inspection of the seized documents (including the relied on documents), and also for furnishing copies thereof, before they could send their reply. After such correspondence went on for some time the appellants sent a letter dated 14-2-1983 requesting that the Department may furnish them with charts which would elucidate the demands raised under the show cause notices, correlating the various figures of clearances with reference to the actual demands made. After some further correspondence ensued, the Department declined the request for furnishing of such charts. A reply dated 18-3-1983 was then sent by the appellants mentioning that the same related to paragraphs 1 to 4 of the first show cause notice and that reply with reference to the subsequent paragraphs could be given only after further and complete inspection is afforded of all the seized records. In this reply the appellants had mentioned they would like to cross-examine the various persons whose statements had been recorded and also some of the officers. Later a further reply dated 4-5-1983 was sent. In both these replies the appellants reiterated that they were manufacturing steel furniture with the aid of power as well as without the aid of power and that since steel furniture manufactured without the aid of power was not excisable at all no separate excise records were required to be kept with reference thereto but that they were maintaining records with reference to which they could segregate the furniture. They further claimed that the statements recorded as well as the contents of the registers etc. seized have been mis-interpreted. They denied that they had no non-power section after 1978. They also complained that information relied upon in issuing the show cause notice had not been fully communicated to them or made available in spite of requests. They claimed that their clearances had been proper and in any event no demand for duty could be sustained in excess of the normal period of limitation as there were no grounds to invoke the larger period. They reiterated their request for supply of charts as were required to be furnished even earlier. They disputed the computation of the clearances as mentioned in the show cause notices. They further stated that they would require cross-examination of the author of the trade opinion relied upon in the show cause notice.
2. When, following the said replies, personal hearings were fixed by the Collector the appellants reiterated the request for supply of charts as demanded earlier and further requested permission for full inspection of the Various records in order to work out figures regarding the demand raised. They pointed out that demands appear to have been raised on various items on which no duty at all was payable, illustrating the same by giving details thereof (for part of period of demand) in their letter dated 18-2-1985. Similar requests were made thereafter also but the Collector declined such further inspection or the need for furnishing charts as demanded. On 11-3-1985 the appellants made a further submission also, pointing out various defects in computation of demands and indicating that if non-excisable items as mentioned therein were excluded, the claim for exemption on the part of the appellants would be fully established in each of the years. After some further correspondence, including a letter dated 10-5-1985 from the Collector as to why no further opportunity was to be given for complying with the request for cross-examination of the witnesses, the Collector under his order dated 25-9-1985 (issued on 26-11-1985) held all the charges established. Accordingly, under the said order he confirmed the demand for Rs. 43,43,350.70 P on goods removed during the period 1-4-1978 to 31-3-1982 and further imposed a penalty of Rs. 50 lakhs. It is against the said order that the present appeal has been preferred.
3. An application has been filed by the appellants for reception of additional evidence also. This is opposed by the Department. Under order dated 12-1-1987 we had indicated the course to be adopted by us in considering the application for reception of additional evidence. We had indicated that this application was to be heard alongwith the appeal, since it was only in the course of hearing the appeal that we would be able to appreciate whether the appeal could be disposed of on the basis of the evidence already available or whether, either for better appreciation of the submissions of both sides, or in the interests of justice, any additional evidence will have to be brought on record so that the defence of the appellants with reference to the charges against them could be better appreciated. We had also indicated that hence the appellants may submit arguments on the need for the additional evidence and the relevance thereof and that the Departmental representative may also make his submissions, firstly, opposing the need for additional evidence and secondly, making submissions on the relevancy and acceptability thereof, further submitting, if need be, whether any further investigation on the additional evidence would also be required. Hence submissions were heard during the hearings before us on the merits of the appeal as well as on the application for additional evidence in the manner indicated above.
4. Since the case rests on the allegations made in the show cause notice, and the evidence relied on for the Department in support of the said allegations in order to make out the charges against the appellants, we feel it will be better if the allegations in the show cause notice are first given out in detail so that with reference to each of the allegations the order of the Collector may be looked into and in that manner discussed, regarding the evidence referred to as establishing the said allegations and the reasons cited for holding the said charges established.
5. Paragraphs 1 to 3 of the show cause notice dated 23-9-1982 contained certain specific allegations supported by reference to specific figures. Paragraphs 5 contains sub-paragraphs (a) to (1) which contained various allegations of infractions of the Central Excise provisions with intent to evade payment of excise duty and by wilfully keeping the Department in ignorance of such infractions.
6. The allegations seriatim are as follows:
(i) A sum of Rs. 71,493/- had been wrongly shown as towards packing and forwarding charges while the same should also have been included in the value of clearances for the year 1980-81.
(ii) A sum of Rs. 13,096/- under Bill No. 178, dated 31-3-1981 was omitted to be disclosed as there was no corresponding Central Excise Gate Pass and this was intentionally done as could be seen from the fact that the previous Bill No. 177 kept the clearances just within the exemption limit of Rs. 5 lakhs for the year 1980-81.
(iii) Besides steel furniture the appellants have manufactured and cleared during 1980-81 other excisable goods, namely, cash boxes (T.I. 48), Trailers (T.I. 34), Coal Tubs, Distribution Boxes and junction boxes (T.I. 68). Though all these products were purported to have been manufactured without the aid of power the trade opinion obtained established that they could not be manufactured without the aid of power. Further declaration as required under Notificatioon No. 111/78 had not been filed with reference to these goods.
(iv) Bills have been issued by the appellants with reference to certain major fabrication works as if they were the result of non-power operation while trade opinion as well as the panchnama dated 2-2-1982 established the fabrication section to by fully power operated.
(v) Parts of steel furniture in innumerable quantity have been cleared whose value is estimated to be in lakhs of rupees but they have not been disclosed anywhere.
(vi) If the value of the goods mentioned under Items (i) to (v) are also taken into account the total value of clearances during 1980-81 would be Rs. 23,71,272/- and thus benefit of exemption would not have been available.
(vii) At the time of the visit to the factory on 16-10-1981 no activities were seen in what was claimed to be the non-power section of the appellants.
(viii) The appellants owned and were using sophisticated and costly power operated machines for every stage of the manufacturing process.
(ix) No distinction was shown by the appellants between the prices of their steel furniture manufactured with the aid of power and such furniture alleged to have been manufactured without the aid of power, though there would, in such circumstances, be a marked difference in prices.
(x) No distinction had been made by the appellants in their returns submitted to the banks between furniture manufactured with the aid of power and that manufactured without the aid of power.
(xi) The figures gathered from the seven wage registers seized during investigation showed the output of the non-power section with a particular number of workers to be higher than the corresponding output of the power section with the same number of workers, though such a possibility is not natural.
(xii) A note book maintained by one Shri Upgade for the period 12-12-1980 to 31-1-1981 gives details of manufacturing work carried out.
(xiii) No segregation had been maintained in the stock register between steel furniture manufactured without the aid of power and that manufactured with the aid of power. Therefore the explanation that such segregation was possible at the time of clearance is not acceptable.
(xiv) Statements of Shri Haneef Bhai and Prahlad Thakre established that the manufacturing operations of the appellants were always with power only.
(xv) The licence showed permission for use of power not exceeding 100 H.P. and use of such power in G5 was confirmed in the statement of the ex-supervisor Shri Khalaskar who stated that from March 1978 onwards G5 had no non-power section.
(xvi) Neither the ground plan nor the classification list dated 6-5-1980 disclosed manufacture without the aid of power. Two registers seized on 2-2-1982 disclosed that more than 90% of the machinery was power operated. All the non-power operated machinery of the appellants had been transferred to Orient Metal Industries in 1978 and thus the appellants factory became completely power operated from 1978.
(xvii) Though the appellants claimed to have obtained some furniture made on job work basis by M/s. Orient Metal Industries investigation disclosed that manufacture by the said Orient Metal Industries was also with the aid of power only.
(xviii) The appellants had been supplying the huge quantities of parts of steel furniture to its sister concerns but without accountal thereof. They had also cleared a large quantity of excisable goods on what were called wapsi gate passes without proper accountal thereof in the excise records.
7. One of the major submissions for the appellants was that they had been denied a fair opportunity to represent their case properly in the adjudication by the Collector and, thus, for this very reason of failure of observe principles of natural justice in the adjudication by the Collector, the order of the Collector is liable to be set aside. The submissions were that (1) fair and proper opportunity for perusal of all records in the possession of the Department was not afforded, especially since the documents seized were voluminous and mere opportunity afforded for inspection was not sufficient since copies could not be taken of such voluminous documents. (2) Break-up of figures relied on by the Deptt. for purpose of duty computation was not furnished though it was specifically asked for and, in the absence of such figures, the appellants were unable to comprehend on what basis and with reference to what material the Deptt. had computed the duty as demanded in the show cause notice. (3) Though request had been made for cross-examination of several witnesses, whose statements or opinions were relied on by the Deptt., such an opportunity was denied and such denial was without jurisdiction. These grounds, which would be general in nature, would also have to be separately discussed apart from the discussion of the reasons stated by the Collector in his adjudication order for coming to the conclusions he did to find the appellants guilty of the several charges made against them.
8. As regards the allegation of failure to include in the value of clearances the amounts shown in the bills as towards packing and forwarding charges etc. the Collector's findings are in para 23.4 of his order where he held that the defence that such expenses were towards post-manufacturing operations was not acceptable in view of the decision of the Supreme Court. The reference was to the decision in the Bombay Tyres International case. But this reason of the Collector does not appear to be correct in the absence of any discussion as to the nature of such expenses which alone would be relevant for arriving at a conclusion (on the basis of the judgment of the Supreme Court) as to whether these charges are by way of post-manufacturing expenses and hence not liable to be included in the assessable value.
9. The second specific allegation (as mentioned supra) was about failure to issue a gate pass with reference to clearance under Bill No. 178, dated 31-3-1981 in a sum of Rs. 13,096/-. The allegation is that the clearances upto and inclusive of Bill No. 177 aggregated to just below the permissible limit and that inclusion of the clearances under Bill No. 178 would have taken the aggregate value of clearances beyond the permissible limit and hence the clearances under this bill was intentionally omitted in order to avail the benefit of exmeption. The appellants have denied that the value of the clearances under Bill No. 178 was not included in the relevant statement for availing the exemption. This aspect, though put forward in defence during adjudication, has not even been discussed by the Collector who proceeds, merely on the basis of failure to issue a gate pass to hold that the value of the said clearances had not in fact been included in the relevant statement. Further, if the clearances under this bill alone would have taken the appellants outside the purview of the relevant exemption notification, based on the aggregate of clearances during the year, it would have been quite easy for the appellants not to clear the goods of this not large value on 31-3-1981 but clear the same on 1-4-1981. The value of the clearance was not so high that, the appellants would have felt compelled to clear the goods the same day. In the circumstances the finding of the Collector on this appears to be erroneous.
10. The 3rd specific allegation is about the manufacture, during 1980-81, of various other excisable goods such as cash boxes (T.I. 48); Trailors (T.I. 34); Coal Tubs; Distribution boxes and junction boxes (T.I. 68) all of which, according to the Deptt., could have been manufactured with the aid of power only (relying on certain trade opinion in this regard). The defence for the appellants on this aspect is several fold. Cash boxes and trailors are claimed by the appellants to have been purchased from other manufacturers and merely marketed by the appellants and therefore no liability for payment of excise duty thereon could be cast on the appellants. The Collector in paragraph 23.7 of his order over-rules this defence on the basis that there is no mention in the bills that the sale of such goods was part of the trading activity of the appellants. We are unable to appreciate this reasoning. No person marketing goods manufactured by another is required to show in the bills that the goods were not manufactured by him but by another. If the Department is of the view that any, or all, of these goods must have been manufactured by the seller himself, and not purchased from any other manufacturer, the burden would be on the Deptt. to establish those facts before demanding duty thereon from the seller. Shri Lakshmikumaran has referred us to several bills seized by the Deptt. (and in the custody of the Deptt. during adjudication proceedings) which by themselves establish that the appellants had been regularly purchasing such cash boxes and trailers from other manufacturers. He is therefore correct in contending that in the face of such material, which was in the possession of the Department itself, the Collector was not entitled to ignore this material and to find against the appellants merely on the ground that the bills issued by the appellants for sale of these goods did not themselves indicate that the appellants were not the manufacturers of the goods sold thereunder.
11. It is further alleged in the show cause notice in this connection that so far as coal tubs, distribution boxes and junction boxes are concerned these could not have been manufactured without the aid of power as claimed by the appellants. This was on the basis that trade opinion obtained in this regard was to the effect that these articles should have been manufactured with the aid of power only. The trade opinion relied on in this connection appears to have been that of the proprietor of another firm by name Metafold Ltd. The complaint for the appellants is that though cross-examination of the author of the trade opinion had been specifically demanded the appellants were denied an opportunity of such cross-examination and, in the absence of such cross-examination, the contents of the said trade opinion should not have been relied upon in arriving at a decision against the appellants on this matter. There is no dispute that such cross-examination had in fact been demanded. The case for the Department is that the author of this opinion was in fact present for cross-examination on two occasions but that the appellants without exercising the said right had sought for adjournment only and therefore they have no cause for complaint that they had been denied the right of such cross-examination. This reasoning is to be found in the letter dated 10-5-1985 by the Collector to the appellants. This reply related to the request made by the appellants for permission to cross-examine various persons, including the author of the aforesaid trade opinion. Since reference to this letter will have to be made at subsequent stages also the same is extracted in full now itself:
"I am directed to refer to the record of personal hearing in the above case on 11-3-1985 and to say that your request for cross-examination has not been acceded to by the Collector for the following reasons :
(i) In your reply to show cause notice dated 21-3-1983, you promised to furnish the names of persons to be cross-examined in your further reply.
(ii) In your further reply dated 4-5-1983 you desired to cross-examine the author of the Trade opinion of Metafold only.
(iii) You did not avail of the opportunity of cross-examination of the said author on the subsequent dates fixed for hearing on 19-1-1985 and 18-2-1985.
(iv) This shows that you are not interested in the cross-examination but have submitted a long list of persons for cross-examination for the first time at such a late stage only to prolong the proceedings."
12. According to his letter the author of the trade opinion of Metafold was present on 19-1-1985 and 18-2-1985 but was not cross-examined. So far as 19-1-1985 is concerned it appears that no hearing was held that day and that though hearing for that day had been fixed it had been adjourned at the request of the appellants. It does not appear, nor is it stated before us for the Department, that while granting the adjournment the appellants were called upon at least to cross-examine the witness present though the adjournment was being granted for other purposes. We say so since the adjournments were being asked for by the appellants on the ground that they had not been given sufficient time or opportunity to peruse the various records which had been seized by the Deptt. and they were therefore unable to meet the charges levelled in the show cause notice regarding the duty liability or the quantification thereof. Withoout going into the question at present whether such a complaint was justified or not, the fact remains that the Collector did think it proper to grant an adjournment on both occasions. It would have been open to him to insist that at least the cross-examination of the witness present (author of the trade opinion of Metafold) should be completed since that would not require the perusal of the other records as was said to be relevant by the appellants on the question of quantification. It does not appear that the Collector did so require the appellants to complete the cross-examination. We say that it appears to be so, since no record of the hearing fixed for either day had been made available to us, though we had asked the Departmental Representative to give us a copy of the notes of the hearing for 19-1-1985 as well as 18-2-1985 in order to verify what took place on the said dates with reference to either the presence of this witness or directions given with reference to the cross-e:amination of the witness on either day or on any other subsequent date fixed for hearing. So far as the hearing on 18-2-1985 is concerned the appellants had presented a written request that day for adjournment again on the ground that no sufficient opportunity had been given to them for inspection of the records and preparation of the charts for working out the figures for duty quantification and hence the hearing fixed for that day may be adjourned. The grant of the said adjournment was under letter dated 19-2-1985 of the Collector. This letter also makes no reference to the presence of the witness for cross-examination or any directions given in that regard either on 18-2-1985 or later. No:: does this letter refer to any refusal of further opportunity for cross-examination of that witness on the ground that the appellants had, without reason, failed to exercise the right of cross-examination on 18-2-1985. The letter merely refers to the appellants' request for inspection of records and the opinion of the Collector that they had sufficient time for inspection and the request for further examination was not justified. Thus even with reference to the adjournment on 18-2-1985 there was no order of the Collector that the appellants would not be entitled thereafter to insist on the cross-examination of the author of the trade opinion.
13. It is in these circumstances that the contents of the subsequent letter dated 10-5-1985 (extracted supra) becomes relevant. Under this letter the Collector states that though the appellants had opportunity to cross-examine the author of the trade opinion on two occasions they failed to exercise such a right and therefore no further opportunity was to be given in this regard. Since, as already stated, the Collector had not indicated, either on 19-1-1985 or on 18-2-1985, that the appellants should cross-examine the witness present irrespective of an adjournment being granted for other purposes, the Collector was not justified in taking the stand that the right of cross-examination had come to an end and could not thereafter be allowed to be exercised. The result is that the appellants had been denied an opportunity to cross-examine the author of the trade opinion and such denial was without justifiable reasons. In that event, the Collector was not entitled to rely on that trade opinion to conclude that the coal tubs, distribution boxes and junction boxes could not have been manufactured without the aid of power. We may note in this connection that in paragraph 23.8 of his order the Collector observes that in view of the other documentary evidence mentioned by him in the earlier parts of the said paragraph the opinion of the expert was of academic nature only. But the same had been relied upon by the Collector.
14. Para 2(e) of the show cause notice reads that the appellants had cleared parts of steel furniture in innumerable quantity, the value of which though not shown anywhere is estimated to be in lakhs of rupees. This allegation, apart from being entirely vague, is not supported by reference to any relevant information as disclosed either by any statement recorded or any particular document or documents seized and proposed to be relied on in the adjudication. In para 2(f) computation is given of the value of clearances during the financial year 1980-81, the total of such clearances being mentioned to be Rs. 23,71,272/-. Of this, the major part is covered by what is described as value of T.1.68 goods cleared as per bills, the said value being shown at Rs. 14,39,173/. The contention of Shri Lakshmikumaran in this connection is that the major part of this amount is evidently the value of clearances of bus body kits. The appellants have, in this connection, prepared a chart of the value of the T.I. 68 articles cleared during 1-4-1980 to 31-3-1981, giving full details of each bill, its Number, date and amount thereof and correlating each bill to the particular item under T.1.68 such as M.S. Channel, Bus Body Kits, Job Work, Labour and installation and sales-tax. It is pointed out that, as established under the said chart, the value of clearances of bus body kits comes to Rs. 13,69,200/-. Shri Lakshmikumaran contends that these figures have been worked out with reference to the bills and registers which had been seized by the Department and which were in the possession of the Department till they were, alongwith others, returned to the appellants a few months ago only. Shri Lakshmikumaran's comment is that it was for the very reason that the appellants were not allowed to have complete inspection of all these documents, and make submissions with reference thereto, that this aspect of the matter could not be highlighted in the hearing before the Collector and that this drawback was the direct result of the denial by the Deptt. of a fair opportunity to the appellants for inspection of records and preparation of their defence. He further submits that is was merely to obviate such mis-carriages of justice that the appellants were repeatedly requesting the Department to furnish full details, by way of charts, giving particulars as to how the duty demand or the value of clearances were computed in issuing the show cause notice but that though, such detailed charts were essential for a proper adjudication, the Department would neither furnish such charts nor allow the appellants a proper opportunity for full inspection to facilitate preparation of such charts. It is in this connection that Shri Lakshmikumaran further draws our attention to a detailed chart, as found in pages 66-67 of Volume 2 of the paper book of the appellants. The contention for the appellants is that in respect of such bus body kits, they were, after fabrication and manufacture, entirely captively consumed within the factory of the appellants themselves in building up the bus bodies (on the chassis sent for fabrication of bus bodies) and in the circumstances the kits so manufactured (and falling under T.1.68) were wholly exempt from duty in terms of Notification No. 118/75. Shri Vineet Kumar comments that it is only now that this aspect of exemption (under Notification No. 118/75) is spelt out for the appellants and hence the said defence cannot be looked into. But in this connection we have to note, as Shri Lakshmikumaran points out, that the value of clearances as computed by the Deptt. in the show cause notice (and with reference to which duty was also being demanded) included installation charges also, which itself would disclose that the bus body kits fabricated by the appellants were being consumed captively for building of bus bodies on the chassis received for such fabrication work and were not being removed as component kits only. This contention appears to us to be quite justified. That would only indicate that the Department, in issuing the show cause notice and disclosing therein the value of clearances as inclusive of these bus body kits, and further demanding duty thereon also, was acting without a proper perception of the facts of the case and that the show cause notice was thus fundamentally defective in character.
15. As earlier mentioned, the main burden of the charge in the show cause notice was that after 1978 the appellants had no machinery which could be operated without power and that hence all manufacture by them after 1978 was with power operated machinery only and hence the claim of clearance by them of duty free articles, on the ground that the manufacture thereof was without the aid of power, was false and fraudulent. This charge is vehemently opposed by the appellants. They contend that they had a power operated section in Shed No. G 5 and a non-power operated section in Shed No. G19 and that it is with reference to the articles manufactured and cleared from Shed No. G 19 that they were clearing the said goods free of duty and were paying duty in respect of clearances from G 5. In this connection the allegation in para 4 of the show cause notice would itself be relevant. The same reads "And whereas besides manufacturing steel furniture and parts thereof with the aid of power, the notices have been manufacturing and selling steel furniture without the aid of power also." Thus this very allegation in the show cause notice itself practically concedes that the appellants were during the relevant period manufacturing steel furniture without the aid of power also. Shri Vineet Kumar submits that this paragraph 4 has been loosely worded and ought not to be taken as an admission by the Department that the appellants were in fact manufacturing steel furniture without the aid of power. We have extracted the contents of paragraph 4 in full supra. In the face of the words used in the said paragraph 4 the contention of Shri Vineet Kumar appears to us to be without much substance.
16. As earlier noted the case for the Department on this question, whether the appellants were, or even capable of, producing steel furniture without the aid of power, rests on several grounds. They were (1) No non-power activity was seen at the time of the visit on 16-10-1981; (2) No separate records were being maintained for furniture produced with the aid of power and that produced without the aid of power; (3) No such separation was made even in the returns submitted to the banks; (4) Huge and costly power operated machinery had been installed and it would have been impractical to produce steel furniture without the aid of power when they had such costly power operated machinery; (5) Such non-power operated machinery as could be seen were rusted and useless; (6) Comparison of the figures of production as claimed by the appellants as of furniture produced without the aid of power disclosed that the quantum alleged to have been produced without the aid of power could really not have been produced in that manner; (7) Register maintained by one Shri Upgade showed that the alleged non-power production could really not have been of that type; (8) The appellants themselves had not disclosed the existence of this non-power unit in the records to be submitted by them such as ground plan, classification list etc.; (9) Such non-power unit as could be seen during the investigation was that of Orient Metal Industries only and not of the appellants. We have now therefore to see how far these allegations have been established with reference to the evidence considered by the Collector and with reference to such additional evidence, if any, which may be considered relevant and admissible.
17. In paragraph 23.3, of his order the Collector, towards the end of the paragraph, had dealt with the statement recorded from Shri Vishnu Prasad Pandey on 16-10-1981 at the time of the visit by the officers and has observed that this very statement would suffice to discredit the case of the appellants regarding production of steel furniture by them without the aid of power. But a reading of the said statement of Shri Pandey shows that this conclusion of the Collector cannot be correct. In his statement Shri Pandey refers to three different sections and the manufacturing activity carried on in each section. He mentions that the first section is the one in which M/s. Eros Metal Works is carrying on manufacturing operations without power and where only wooden furniture is made and also slotted angles, etc. and assembly work is done. The next sentence reads "the manufacture of steel furniture was stopped since last two months." It is, therefore, clear that the statement of Shri Pandey was that manufacture of steel furniture was earlier being carried on in this non-power section but that it was not then (at the time of statement) being carried on, having been stopped two months earlier. Hence while this statement may serve to establish that on 16-10-1981 no non-power activity was being carried on by the appellants for manufacture of steel furniture in that section that day, the said statement would in no case serve as admission that the appellants had at no time manufactured steel furniture without power. Regarding the middle section Shri Pandey has stated that Orient Metal Industry (to be referred to as OMI in short hereinafter) was carrying on manufacture without the aid of power, but that the said work was not in progress for the last few months. Referring to the 3rd section he has stated that therein the appellants (to be referred to as EMW in short hereafter) are manufacturing furniture as well as bus body on chassis, evidently with the aid of power, though it is not so specifically stated. It may also be noted that towards the end of the statement Shri Pandey has stated that in both units the staff is separate for the power and non-power section. Thus in this statement Shri Pandey has specifically referred to manufacture of steel furniture without the aid of power by EMW and had only stated that the said activity was not being carried on during the earlier two months. Therefore, the conclusion of the Collector as if this statement, to use the words of the Collector, "clearly rendered the appellants stand hollow about its having a separate manual section for manufacture of steel furniture" is not correct.
18. It is admitted for the appellants that while submitting statements to the bank (which was evidently providing financial support to them) no separate records were maintained in respect of the furniture manufactured with the aid of power and furniture manufactured without the aid of power. This, according to the Department, would be an indication that there could have been no such separate manufacture without the aid of power and that all manufacture should have been with the aid of power only. We are unable to accept any such inference or conclusion. The bank would really not be interested whether the furniture had been manufactured with the aid of power or without the aid of power, since its interest would be only to see that its advances are covered by sufficient quantity of manufactured stock. It is admitted by the appellants that in the stock register also no separate mention was made whether the furniture entered as having been added, or taken out, each day, had been manufactured with the aid of power or without the aid of power. The case for the Department is that this would establish that there could have been no production without the aid of power. The explanation for the appellants is that so far as steel furniture manufactured without the aid of power is concerned, the same was not excisable and hence no records were even required to be kept of the production thereof and hence no adverse interference could be drawn on the ground that no such record was kept. They further claim that they could visually distinguish between furniture manufactured without the aid of power and that manufactured with the aid of power and hence at the time of removal from the store room they could properly segregate and account for the furniture manufactured with the aid of power and account for the same for excise purposes. Shri Vineet Kumar contends that such a claim is entirely unbelievable and should be rejected. In the absence of any opinion of a competent technical person in support of the view, we would not like to rest our decision on the basis of this aspect of this case.
19. The appellants admit that they had installed costly machinery that could be operated with the aid of power only but that it was in plot G 5. The Department contends that when such machinery was available it would have been impractical to produce furniture without the aid of power. The Deptt. has further alleged that the appellants had not differentiated in price between the furniture manufactured with the aid of power and furniture manufactured without the aid of power and this uniformity of price would establish that there could have been no two different sources of manufacture. On this question, that there would necessarily h,ave been such a differentiation in price between the furniture produced with the aid of power and that manufactured without the aid of power, the show cause notice referred to some trade opinion as supporting this view. This is to be found in para 5(d) of the show cause notice. The complaint of the appellants is that no such trade opinion was ever disclosed to them. We say so since the order of the Collector reads (in para 24.3.) "the contention that because trade opinion was not supplied to the Company there was denial of natural justice, is therefore, not found to be material to the point of issue." This observation makes it clear that the trade opinion referred to in para 5(d) of the show cause notice had not in fact been made available to the appellants. When such a trade opinion had been referred to in the show cause notice, and is the basis of part of the charges, the refusal to disclose the same to the appellants was certainly a violation of rules of natural justice. The Collector has in the same paragraph further observed "it does not indeed require an expert opinion to reiterate that the products manufactured without the aid of power happen to be of inferior type and fetch less price as compared to the identical products manufactured with the aid of power." This observation of the Collector appears to us to be unfounded and, in any event, too sweeping. The generalised observation of the Collector, and the conclusions he draws therefrom, appear to us to be unjustified.
20. It is in discussing the allegations contained in para 5(j) of the show cause notice that in paragraph 24.8 of his order the Collector observes that the pachnama dated 2-2-1982 recorded in the G19 plot showed that whatever non-power machinery may have been found installed, were either rusted or unused for a pretty long time. This observation is relied on by him as disproving the case of the appellants. But Shri Lakshmikumaran contends that the conclusion of the Collector, based on whatever was noted in the above said panhnama, is totally erroneous. According to him this panchnama did not refer to, or relate to, the machineries of the appellants but evidently referred to, and related to, the machinery of OMI. In support of this contention he refers us to the sketch drawn by the inspecting officers themselves. This sketch plan had been drawn the next day i.e. 3-2-1982. In fact we may see that even in the panchnama the reference to the rusted and useless machinery is with reference to what the officers found in the manufacturing premises of OMI. The relevant portion of the panchnama reads as follows "After this the Central Excise Officers came to the ground floor wherein the manufacturing premises of OMI are situated and in which work of manufacture of non-power operated furniture is carried on. The machinery in these premises are as under and in these premises no work was carried on and the machines are rusted and not working since many days." Therefore even the panchnama refers to an inspection of the premises of OMI only in which their own non-power operated manufacturing operations were being carried on and not the premises of the appellants. In the sketch the various machinery in the non-power section of OMI are mentioned with the location thereof and it is noted that next thereto is what is described as "side hall EMW(NP)". It is, therefore, clear that the officers were told that the non-power operated section of the appellants (EMW) was situated next to the hall in which OMI's non-power operated section was functioning. But yet the officers do not even appear to have entered the said hall, or inspected the machinery therein, in order to form any opinion whether the said machinery was in working condition, what quantity of furniture could be manufactured with reference thereto, etc. The complaint for the appellants is that the officers deliberately omitted to do so since if they had entered the hall their charge against the appellants would be proved baseless. To further support his allegation of bias on that part of the departmental officers Shri Lakshmikumaran points out that this particular sketch was not even disclosed in the; show cause notice, or the list of documents disclosed therein, as,being relied upon and that the existence of this sketch came to the knowledge of the appellants only when they were, under specific directions issued by this Tribunal in connection with this appeal, given inspection of all the documents seized and not merely of the documents relied upon. This question, whether there was any bias and whether the appellants were not given due opportunity to inspect all the documents which were seized and which were in the possession of the Department, would be taken up tor consideration a little later. For the present purpose this sketch, and the mention therein of a non-power section of EMW in the side hall, read with the observations as to where rusted machinery were located, would suffice to establish that the conclusion of the Collector, as if this rusted machinery was that of the appellants, was not correct or justified.
21. The Collector has further relied on several entries, in registers and/records seized which, according to him, bear out that the version of the appellants, as if they had been manufacturing steel furniture without the aid of power also, cannot be correct. One such register is said to have been maintained by one Shri Upgade during the period 12-12-1980 to 31-3-1981. The reference to this register in the show cause notice is in paragraph 5(f). It is mentioned therein "in the same note book on 12-1-1981 as many as 2632 pieces are shown to be cut which is physically not possible if the work is done manually." The appellants have filed the photostat copies of the relevant pages of this register. This entry regarding 2632 pieces is on 12-1-1981. The Deptt. appears to have proceeded on the basis that the cutting was of table tops. But a perusal of the entry shows that the 2632 pieces cut were gussets. A gusset is a triangular piece for lending strength at the corner at which two other pieces are to be welded. Shri Lakshmikumaran points out that the manufacture of such gussets by the appellants was for purposes of use thereof in building bus bodies. He has shown us the sketch of the structural assembly framework of bus bodies on Tata 1210/E Chassis. He has shown us that a large number of such gusset pieces would be required for use in constructing the roof of the body. These gussets are very small pieces. Therefore, it may not be improbable that 2632 of such gusset pieces were cut between 5 P.M. to 9 P.M. on that day without the aid of power. It is apparent that the Deptt. fell into serious error in concluding that so many pieces could not have been cut without the aid of power since the Deptt. was evidently of the wrong impression that the pieces cut were large size office table tops. Shri Lakshmikumaran further points out that the Deptt. evidently fell into that error construing the use of the English letters "O.T." at several places in the register. He points out that these letters - O.T. had been used in the register to denote overtime and not office tables. It is no doubt true that the same register refers to office tables also but in doing so the words "office table side" or "office table tops" are used. It is therefore clear that whenever the letters O.T. are used they do not refer to office tables but over-time. It is therefore clear that reference to this register of Shri Upgade in the show cause notice was on a wrong reading of the entry therein.
22. In the same paragraph 5(f) it is mentioned that whereas during the period 18-12-1980 to 31-1-1981,26 office tables had been shown as cleared in the RG-1 register of the power section as many as 121 office tables had been sold during the said period on bills purporting to relate to non-power section. In the order of the Collector there is no specific reference to this allegation or his conclusion on the basis thereof. It appears to us that even this allegation in the show cause notice was not a proper one for arriving at a conclusion against the case of the appellants about manufacture of steel furniture by them without the aid of power. It may be seen that the allegation is about production with the aid of power during a period and sale, during the same period, of tables produced without the aid of power. There is nothing improbable in sales taking place during any period of articles manufactured not during that period but in an earlier period. Therefore the allegation as if the sale of a larger number during a period ( as manufactured without the aid of power) though manufacture with the aid of power during that period was of a smaller quantity, would not make out a case against the appellants of disposing of furniture manufactured with the aid of power as having been manufactured without the aid of power. The comment of Shri Lakshmikumaran is that this allegation would establish the contention of the appellants that the show cause notice itself had been issued on either insufficient facts or on a wrong reading of the facts gathered from the registers or the statements.
23. It is in this connection that we will have to refer to the reliance by the Deptt. on statements recorded from two labour contractors by name Shri Haneef Bhai and Shri Prahlad Thakre and on employee by name Shri Khalaskar. These allegations are to be found in paragraphs 5(g) and (h) of the show cause notice. In paragraph 24.5 of his order the Collector has referred to the statements of Shri Haneef Bhai and Shri Prahlad Thakre as supporting the conclusion of the Deptt. that after 1978 the appellants had no non-power machinery and that their entire manufacture was with the aid of power operaed machinery only. In his statement Shri Haneef had stated that during the time he was working in the factory of the appellants he had not seen work carried out on manually operated macines and whatever work he did was with the aid of electric power only. Shri Thakre has also stated in his statement that during his work as a contractor under the appellants he had been using machinery run on electric supply and that it was only when such supply failed that he used to employ more labourers to have the work done within the time allowed. The appellants contend that the statements of these persons ought not to be accepted, firstly for the reason that an opportunity for cross-examination of these witnesses was not afforded to them and that such denial was without proper reason and thus rules of natural justice were violated and, secondly, for the reason that the statements of these persons related to the work done by them in the shed G 5 wherein they were carrying out their work while the non-power operated section of the appellants was in G 19.
24. Taking the second of the said objections for consideration in the first instance it may be seen that in the statements of the said two persons they referred to their work in G 5 shed and therefore their statements cannot be related to the work claimed by the appellants to be carried on in G 19. We have already seen that so far as this G 19 shed is concerned the very sketch prepared by the officers of the Deptt. refers to a non-power operated section of EMW therein and that the officers had not chosen to enter that portion and find out what machineries were installed therein. In the circumstances reliance on these statements for concluding against the appellants on the case of manufacture of steel furniture without the aid of power cannot be taken to be correct.
25. So far as the other complaint of the appellants about the denial of opportunity for cross-examinat; on of these two witnesses it may be seen that in their reply dated 18-3-1983 the appellants had specifically mentioned in para 12 that they would like to cross-examine the various persons whose statements had been recorded. In their subsequent reply dated 4-5-1983 they had again specifically indicaed in para 29 that they would like to cross-examine the author of the trade opinion of Metafold. In his letter dated 10-5-1985 the Collector had observed that as the appellants had not furnished the list of the names of persons to be cross-examined as mentioned in the letter dated 18-3-1983 and since the appellants did not avail of the opportunity to cross-examine the author of trade opinion on 19-1-1985 and 18-2-1985, it was clear to the Collector that the appellants were not interested in cross-examination but had filed a long list of witnesses for cross-examination merely to protract the proceedings and he was therefore disallowing the request for cross-examination. So far as the denial of the request for cross-examination of the author of the trade opinion of M/s. Metafold the same had been dealt with earlier. So far as the request for cross-examination of the other persons is concerned it may been seen that even the letter of the Collector above referred to does not even mention that the several persons whose statements had been recorded and whose cross-examination had been demanded under the reply dated 18-3-1983 had ever been summoned at all and made available for cross-examination. The claim for the Deptt. that there was no need to summon them, as the appellants had promised to submit a detailed list of such persons, cannot be accepted in the face of specific claim in the reply dated 18-3-1983. It is commented by Shri Vineet Kumar that these two persons (Haneef Bhai and Prahlad Thakre) were two employees of the appellants themselves and if the appellants were interested in examining them they could have produced them for cross-examination. But as is rightly pointed out for the appellants the very statement recorded from Shri Thakre indicates that he had ceased to work (as a contractor even) under the appellants from February, 1982. It is mentioned for the appellants that Shri Haneef Bhai had also stopped work under the appellants at or about that time. Hence the submission above made, as if these persons could have been produced by the appellants themselves, cannot be correct. Thus the appellants were justified in contending that no reliance can be placed on the contents of the statements of these two persons when the appellants had been denied an opportunity to cross-examine the said persons and that such denial was for no justifiable reason.
26. In this connection we may at this stage itself refer to the statement recorded from one Shri Madhukar Khalaskar on which also reliance had been placed in issuing the show cause notice. His statement is with reference to a list of machinery shown to him, the said list having been submitted by EMW in 1980 to the District Industries Office, Nagpur. Reliance is placed on this statement for the admission therein that ever since Shri Khalaskar joined the appellants no non-power work was being done by them. But we may note that in his statement Shri Khalaskar stated that ever since he joined the appellants no non-power work was being done in G 5 and that no non-power machinery was installed in G 5. Thus the statement of this person is not with reference to what machinery were installed G 19 and what work was being carried on in G 19. Since the case for the appellants is, and had always been, that their non-power operated machinery was installed in G 19, and manufacture with the aid of such machinery was in G 19 only, no conclusion can be drawn against them on the basis of this statement of Shri Khalaskar which specifically referred to the work in, and the machinery in, G 5 only.
27. Shri Lakshmikumaran further comments that this statement would in fact lend support to the case of the appellants. As earlier mentioned, Shri Khalaskar has been examined with reference to a list of machinery furnished by the appellants to the District Industry Centre in Nagpur. This list of machinery had been submitted by them on 14-11-1980. Shri Khalaskar has specifically identified some of those machineries as can be used for non-power work while the others could be used with power only. Shri Lakshmikumaran comments that this should establish that even after 1978 the appellants were owning, and using, non-power operated machinery also and this would therefore disprove the case of the Deptt. that after 1978 (when OMI was floated) the appellants were not in possession of, and were not at all using, any non-power operated machinery.
28. As earlier mentioned, the charge in the show cause notice was that there could have been no manufacture of steel furniture without the aid of power by the appellants at any rate after 1978 since all their non-power operated machinery had been transferred to OMI in 1978. It is for this reason, evidently, that the Collector did not choose to attach any importance to the several instances cited by the appellants in which the concerned officers, had, after initiating action against the appellants for manufacture and removal of steel furniture with the aid of power but without payment of duty, subsequently dropped such action accepting the case of the appellants that such furniture had been manufactured without the aid of power. The view of the Collector was that no significance need be attached to these earlier orders. Such a conclusion may not be wholly unreasonable in the circumstances of the case, since these earlier orders related to seizures made before 1978 and, according to the Department, the appellants were in possession of machinery that could be operated without the aid of power before 1978. But the question would be whether such orders would be wholly irrelevant in view of the contention for the appellants that such manufacture of steel furniture without the aid of power continued after 1978 also. We have earlier seen that the case for the Department about the appellants having parted with all their non-power operated machinery by 1978 itself was not correct.
29. One of the main contentions put forward by the appellants during the adjudication proceedings, and again reiterated during the hearings before us, is that the show cause notice had been issued on the basis of mere presumptions as regards the quantum of clearance of excisable articles and that when the appellants sought for particulars regarding such quantification they were not merely not furnished with such information but were denied an opportunity even to verify the records to find out whether the inferences drawn by the department were supported by facts. Paragraph 2(f) of the show cause notice quantified the value of various clearances as in 1980-81. Such quantification was under seven heads, the 7th head reading "value of T.1.68 cleared as per Bills", the amount being mentioned as Rs. 14,39,173/-. The worksheet attached to the show cause notice disclosed clearances to the total value of Rs. 1,52,71,378/- during the years 1978 to January, 1982. The quantum of such clearances are said to have been computed in the said worksheet (as seen from the remarks column) on the basis of sales registers (1978,1980,1981-82) and on the basis of Balance Sheet in 1979. The contention for the appellants throughout has been that the basis of such computation was wholly erroneous since the figures in the sales registers and balance sheet comprised not merely the value of excisable items manufactured and cleared but also the value of not merly non-excisable articles manufactured by the appellants but also the value of the goods bought by the appellants and resold by them and further included various other incidental charges such as packing, forwarding, sales tax paid, job charges etc. It is for that reason that they had been asking the Deptt. to furnish the break-up of details so that the correctness of amount demanded could be decided by verifying whether the demand related to the value of excisable articles manufactured and cleared or value in respect of other articles on which no duty was payable and the expenses as mentioned above. It is not denied that the Deptt. consistently refused to give any such break-up of figures taking the stand that since the figures of clearances have been taken from the register maintained by the appellants themselves, no further details were required to be given. The appellants had been requesting the department either to furnish charts giving the above details or at least allow sufficient inspection of the various registers etc. seized so that the appellants themselves may prepare such charts to establish their case that a major portion of the amount on which duty was being demanded related to non-excisable ventures of the appellants.
30. In order to establish the need for such detailed particulars the appellants had annexed to their application dated 18-2-1985 a chart prepared by themselves for the period 1-4-1978 to 30-6-1978. They had pointed out that a perusal of the figures in the said chart for a period of 3 months only would disclose that within that period duty had been demanded on various amounts which related to manufacture of articles on which no duty was payable and other expenses such as packing, sales-tax, discount etc. on which no excise duty was payable. The Deptt. had even thereafter refused either to furnish such charts for the remaining periods or allow necessary time for the appellants to inspect all the seized records and prepare such further charts. Shri Vineet Kumar contended that the request made by the appellants for such charts being furnished by the Deptt. was an unjustified request and that the said request was rightly turned down by the Deptt. and that no prejudice was, or could have been, caused to the defence of the appellants by reason of such a refusal. To rebut such an argument Shri Lakshmikumaran refers us to charts prepared by the appellants now (after the seized records were returned to the appellants after this appeal was filed) for one of the years in question. The information in that chart indicates that during that year duty was being demanded (under the show cause notice) on various amounts (such as wooden furniture; coal tubs etc.; raw materials purchased; realisation on sale of empty drums etc. job work, labour charges; trading activities etc.) on which no duty would at all be payable. Since this chart had been prepared on the basis of the very documents which alone are said to have been relied on by the Deptt. for preparing their work sheet attached to the show cause notice for quantifying the clearance on which duty was to be demanded, the conclusion that such duty demand was to a large extent not supportable is inevitable. This aspect is highlighted by the appellants to establish their contention that the Deptt. was not acting fairly in the issue of the show cause notice but appears to have been biased against the appellants. While it may not be necessary to conclude that there was any such bias it may not be inappropriate to conclude that the show cause notice appears to have been issued without proper care being taken to verify all facts necessary to be considered as to liability for payment of duty. It is specially significant that the figures furnished as of clearances on which duty was payable included the value of artilces purchased by the appellants and resold by them, though no duty could in any event have been demanded on the value of such articles.
31. This aspect becomes very significant in view of the contention of the appellants that if such amounts are excluded from the value of clearances in each of the years as mentioned in the show cause notice the quantum of clearances by the appellants would be found to be very much lower than the exemption limits during each of the years and therefore no duty would have been payable by the appellants even on the excisable articles manufactured by them. Unfortunately, no specific finding on this aspect could be recorded since the Deptt. by its refusal to furnish full details even when specially requested for by the appellants, had made it impossible either for themselves or for us to record any clear finding on this question.
32. In several places of his order the Collector refers to the wilful failure on the part of the appellants to disclose to the Deptt. the fact of manufacture by the appellants of furniture without the aid of power and the appellants thus being guilty of suppression of material facts. Reference is made in this connection to the omission on the part of the appellants to make any reference either in the ground plan or the classification lists, to the non-power operated part of the appellants' factory. Neither the ground plan nor the classification lists have been shown to us to appreciate this criticism.
33. On the question of the appellants having been denied a fair opportunity to present their case before the Collector, since they had been denied opportunity to cross-examine witnesses on whose statement the Department relied it had already been seen that though the appellants had indicated in their first reply that they would wish to cross-examine the various deponents and had further mentioned, in a later reply, that they would want to cross-examine the author of the trade opinion, the Collector had declined such permission for cross-examination by observing in paragraph 21 of his order that the list of witnesses was given late and that the appellants had not availed of the opportunity to cross-examine the author of the trade opinion. While it may be true that a list containing the specific names of the persons was given at the time of the hearing the fact remains that in their first reply itself the appellants had specifically mentioned that they would want to cross-examine all the persons from whom statement have been recorded during investigation. The fact that subsequently they gave a list containing specific names of the individuals would not mean that it was only then that the desire for cross-examination of these persons was expressed. So far as these deponents are concerned it does not even appear that they had ever been either summoned or made available for cross-examination. So far as the author of the trade opinion is concerned it has already been seen that adjournments had been granted without calling upon the appellants to cross-examine the said witness if he had been present. In the circumstances reasons mentioned in para 21 to justify the denial of the request for cross-examination is not proper or acceptable.
34. It is therefore seen that apart from denying the appellants their request for clarification as to how the quantification of clearances (on which duty was being demanded) has been arrived at, the appellants were not allowed to exercise their right of cross-examination of the persons on whose statements the Deptt. relied in holding that the charges made in the show cause notice were established. Thus on both these aspects there had been a gross violation causing undoubted prejudice to the appellants both in making out a defence and later in establishing the same.
35. Another matter with reference to which also the appellants are said to have contravened the provisions of the Central Excise Act and Rules relates to goods covered by what are called wapsi gate passes. The work-sheet attached to the show cause notice mentions the value of clearance under such gate passes to be Rs. 5334/- in January, 1981 to March, 1981 and Rs. 20,720/- in April, 1981 to January, 1982, the duty said to have been evaded being Rs. 1400.17P and Rs. 5439.40P respectively on the said clearances. Here again, no details had been furnished in the show cause notice except mentioning the figures abovesaid and, as earlier noted, such details had not been furnished subsequently also. The Collector deals with this matter in paragraph 24.10 of his order. He mentions that the contention for the appellants was that the said wapsi gate passes might have, or must have, related to return of goods brought for repair or replacement of some components. He rejects this on the ground that such a defence would be only notional and cannot be accepted. The appellants were evidently put to the necessity of advancing a probable or notional defence only because they had not been furnished with details of these wapsi gate passes and therefore had to merely venture on an inference as to what could have been the nature of the goods covered by the said gate passes. For the reasons stated earlier we are satisfied that the appellants had been denied a fair opportunity of presenting their case since the information relied on by the Deptt. had not been disclosed to them properly and such details were refused even when specifically asked for. In the circumstances the conclusion of the Collector on this matter cannot be supported. We may note that at the end of the paragraph the Collector observed as follows : "It is evident that in order to prove their claim the Company had no other alternative but to doctor/cook the paper transactions relating to sale. Issue of wapsi gate passes were (SIC as in copy in paper book) issued for the goods returned only and not manufacture. The Company has really avoided to furnish any reply against the charge levelled in this para that it removed parts of steel furniture worth lakhs of rupees to its sister concerns either without accounting for or without mentioning its value." As earlier noted the total value of clearances covered by wapsi gate passes was about Rs. 26,000/- only. In the circumstances the observation (relating to paragraph 5(1) of the show cause notice) as if the wapsi gate passes could have covered removal of parts of steel furniture worth lakhs of rupees is apparently incorrect.
36. The discussion earlier establishes that the material considered acceptable by the Collector, in arriving at his conclusion as to the charges levelled in the show cause notice being established, was hardly sufficient to support such conclusions. It would therefore be clear that the order of the Collector should be set aside for the said reason itself even without making reference to the additional evidence that the appellants have produced. But we feel that it would be proper to make reference to at least one part thereof to show that the conclusions of the Collector, on the improbability of the appellants having manufactured steel furniture without the aid of power during the relevant period, cannot be correct and that the defence of the appellants would be justified. As earlier mentioned, the case for the Deptt. rested on the assertion that after 1978 the appellants owned no machinery for manufacture of steel furniture without the aid of power and therefore all their manufacture of steel furniture after 1978 was with the aid of power operated machinery only. For this the Collector had relied on the Panchnama dated 2-2-1982 and certain statements. These have been discussed earlier. The Collector has proceeded on the basis that the G 19 plot belonged to OMI and that it was only OMI that was carrying on its manufacturing operations in the said plot and not the appellants. It is in this connection that we may note that the appellants have produced copies of their earlier correspondence with the District Industries Centre and replies to them by the DIC. On a request by the appellants the DIC had supplied the appellants with copies of certain records available in their files, the covering letter for the supply of such copies being their letter dated 10-3-1986. Since this letter is from the DIC, and the copies are certified to be taken out of their files, there can be no doubt about the genuineness of such documents and they having come into existence on the dates they bear. The first document is an application dated 9-9-1978 by OMI to the Joint Director of Industries in which they had specifically made clear that the entire non-power activity at G 19 is not that of OMI only but that they are sharing the space with EMW, who were also carrying on their non-power activities in G 19. The second is a letter dated 6-1-1976 by the appellants to the Collector and Deputy Commissioner of Industries wherein they had indicated that their non-power machines are being shifted to G 19. The next is a copy of the letter by the appellants to the DIC dated 30-8-1980 whereunder they had specifically referred to their continuing their non-power operations at G 19 "as usual". The next is a list furnished by them to DIC on 17-9-1980 giving the list of various dies and jigs with them, several of them relating to non-power operated machinery. It is therefore clear that even after 1978 the appellants had been intimating the concerned public authorities about their continuance of their non-power operations at G 19, which they had commenced much earlier. In the circumstances the conclusion of the Collector as if the entire non-power operated section of the appellants was closed down in 1978 cannot be accepted.
37. Another document to which also we may make reference in this connection (by way of additional evidence) would be the agreement entered into between the appellants and OMI on 10-7-1976, whereunder the appellants had retained their right to continue their non-power manufacturing activity in G 19. It was evidently to this agreement that reference has been made by OMI in their letter dated 9-9-1978 to the Joint Director of Industries (as mentioned in the previous paragraph).
38. To summarise it is clear that the show cause notice had been issued without proper investigation and without properly appreciating the facts available, demand for duty being made thereunder on (i) articles manufactured without the aid of power (and therefore non-dutiable) as also (ii) on various other articles such as Bus body kits which were exempt from payment of duty in terms of the notification relied on by the appellants and (iii) on various other items such as articles bought by the appellants and resold by them and (iv) even on amounts spent towards payment of packing and forwarding charges, sales-tax etc. (without going into the question whether such charges were in-cludible in the assessable value at all) on which no duty could be demanded at all. It has also been seen that when the appellants wanted to make their case clear and furnished a chart at least for a part period and requested the Department to furnish figures in a similar fashion for the entire period, the Deptt. turned down the said request without proper reason and thus denied the appellants a proper opportunity to present their case. Nor did the Collector even go into this aspect properly in his order to verify whether the duty demanded should be brought down as contended in the chart furnished. In paragraph 25 of his order the Collector has dealt with this aspect of the case. He has pointed out that the appellants had furnished a chart for the period 1-4-1978 to 30-6-1978 mentioning that an amount of Rs. 2,64,003.40 paise was deductible from the value of clearances shown in the show cause notice for the said period since the said amount related to sales pertaining to trading activity, clearance of wooden furniture, slotted angle, resale of fabricaed items and sales-tax. The Collector comments that though the appellants have been given full opportunity to produce their records to prove their case regarding such deductible amounts the appellants had not done so and had taken a non-cooperative attitude and therefore since the duty liability had been prepared on the basis of the Company's own records the claim as put forward by the appellants could not be accepted. It is significant that the Collector does not even choose to discuss, at least with reference to the chart presented by the appellants for the period 1-4-1978 to 30-6-1978, whether the claim on the part of the appellants for deduction of the sum of over Rs. 2.6 lakhs, was made out as claimed by the appellants. He has given no finding whatever on this question though details therefore were available in the charts furnished by the appellants and the correctness of the said claim had to be verified with reference to the records in the possession of the department itself. If he had done so, and had found the claim of the appellants acceptable for the said sum of Rs. 2.64 lakhs or even a part thereof, it would have shown to the Collector that similar work will have to be done with reference to the remaining part of the period in issue and that therefore detailed chart as asked for by the appellants were a necessity. On the other hand, the Collector has not chosen to even look at the chart prepared by the appellants but had rejected the defence of the appellants on the premise that as the demand was based on the records of the appellants there was no question of the demand being incorrect. For the reasons mentioned earlier such a conclusion was obviously incorrect and improper.
39. In the above view the order of the Collector, both regarding the demand for duty and the imposition of penalty, has to be necessarily set aside. We find that two separate appeals have been preferred by the appellants, though both appeals are with reference to the same order (i.e.) No. Order-in-Original 16/85 (Steel furniture) dated 25-9-1985 passed by the Collector of Central Excise & Customs, Nagpur and the relief prayed for in both appeals is the same (i.e.) to set aside the said order and the demand for payment of duty as well as imposition of penalty thereunder. We are unable to understand why two separate appeals for the same relief and against the same order should have been preferred by the appellants. Our order above would dispose of Appeal No. E-246/86-D. Since the relief prayed for in the other Appeal (E/247/86-D) is the same as has been granted in allowing Appeal No. E/246/86-D, we therefore dismiss the Excise Appeal No. 247/86-D as having become infructuous in view of the order passed in Excise Appeal No. 246/86-D.