Customs, Excise and Gold Tribunal - Delhi
Jajmau Dyeing And Proofing Company vs Collector Of Central Excise on 7 May, 1986
Equivalent citations: 1986(8)ECR553(TRI.-DELHI), 1986(25)ELT595(TRI-DEL)
ORDER D.C. Mandal, Member (T)
1. This is a Revision Application filed before the Central Government, which, on transfer to this Tribunal, is being treated as an appeal.
2. In this case, a show cause notice was issued to the appellants on 15-10-74 alleging that they had contravened the provisions of Rules 174, 173-B, 173-C, 173-G, 52-A, 53, 9 and 173-F read with Rule 173-Q of the Central Excise Rules, 1944 by processing 3,87,997.28 meters of canvas and duck cotton fabrics with the aid of power during the period 1-4-73 to 31-3-74 valued at Rs.23,27,983.68 Raise without applying for Central Excise Licence, without submitting classification list and price list, without proper accounting in the prescribed Central Excise records and removing the processed fabrics from their factory without issue of gate passes and without payment of Central Excise duty leviable thereon. They were, therefore,. asked to explain why penalty should not be imposed on them under Rule 173-Q of the Central Excise Rules and why Central Excise Duty on the processed canvas and duck cotton fabrics mentioned above, at the appropriate rate should not be demanded under Rule 9(2) of the Central Excise Rules, 1944. In reply to the show cause notice, the appellants stated, inter-alia, that they had not used power in the process of the Cotton Fabrics and their Jigger and padding mangle were manually operated. They also stated that the Central Excise Officers visited the factory on 18-2-74, 5-3-74 and 23-4-74 but, they did not notice the use of power in the processing of fabrics in the appellants' factory. Two electric motors fitted on trolleys with their accessories, and grey and processed stock of cotton fabrics detained on 19-4-74 and then seized on 23-4-74 belonged to M/s. Jajmau Calenders, which is a separate firm. As they had processed cotton fabrics without the aid of power, they were not required to observe Central Excise Rules nor were they required to observe Central Excise duty on the processed fabrics. Collector of Central Excise, Kanpur held that the appellants were engaged in the processing of cotton fabrics falling under Central Excise Tariff Item 19-1(1) and 19-1(2) with the aid of power and steam and that even if it is held that power was not used, the fact remained that the fabrics were processed with the aid of steam and differential duty was payable by them at. the rates indicated in the Notification No. 88/69-CE dated 1-3-1969, as amended, under the head "Fabrics processed in any other manner" in respect of cotton fabrics falling under Tariff Item 19-1(2) and in respect of fabrics falling under item 19-1(1) differential duty was payable under Notification No. 128/70-CE dated 6-6-70. On the basis of these findings, the Collector imposed a penalty of Rs.50,000/- on the appellants under Rule 173-Q of the Central Excise Rules and also directed them, under Rule 9(2) ibid, to pay duty leviable on the aforesaid cotton fabrics processed and removed without payment of duty. Collector left the exact amount of duty to be calculated by the Assistant Collector of Central Excise, Kanpur which was to be intimated to the appellants within two months from the date of issue of the order. The Collector further held that since there was difference in the rate of duty on the canvas and duck fabrics manufactured on the powerloom and in composite mill, the appellants were asked to furnish evidence to the satisfaction of the Assistant Collector of Central Excise, Kanpur that it was powerloom cloth, for claiming assessment at the lower rate of duty, failing which the base cloth would be deemed to be mill made. He also directed that in case no evidence regarding (i) manufacture of the base cloth in power-loom and (ii) payment of duty at grey stage is furnished to the Assistant Collector within one month of the receipt of the Order-in-original, duty should be calculated at the highest rate without allowing any set-off. He also directed that duty on the fabrics falling under the then Central Excise Tariff item 19-1(2) shall be calculated at the rate of 25 Raise per sq. meter in the case of fabrics manufactured in grey stage in composite mills, 9.5 Raise per sq. meter in the case of powerloom fabrics and 7 Raise per sq. meter in the case of handloom fabrics.
3. Being aggrieved by the Order of the Collector, the appellants filed an appeal before the Central Board of Excise and Customs, New Delhi, which was dismissed, subject to reduction of penalty from Rs.50,000/- to Rs.25,000/-.
4. In the Order-in-appeal, the Board has held that provisions of Notification No. 193/72, which was issued to amend the Notification No. 88/69, are applicable only to the fabrics falling under Tariff Item 19-1(2), but the canvas, which was processed by the appellants, fell Under Tariff Item 19-1(1). The Board has also held that for the purpose of assessment of processing duty on fabrics falling under Tariff Item 19-1(1) the provisions of Notification No. 128/70-CE would be applicable. For items attraching Notification No. 128/70-CE no concession similar to that provided in the Notification No. 193/72-CE was available, and the Central Excise duty was leviable for the processing carried out by them since they admittedly used steam in the processing.
5. The present appeal (which was originally filed as a Revision Application before the Government of India) is directed against the aforesaid Order-in-appeal passed by the Board.
6. During the hearing before us, Shri B.B. Gujral, learned advocate appearing for the appellants argued that:-
(i) Steam was used for heating the dyeing solution. Use of steam for the purpose of heating the dyeing solution was permissible under Notification No. 193/72-CE, which amended Notification No. 88/69-CE dated 1-3-69. Process of padding with the aid of steam is also not dutiable under Notification No. 88/69-CE, as amended by Notification No. 193/72.
(ii) Trolley and electric motors were seized from M/s. Jajmau Calanders. The seized goods also belonged to that firm.
(iii) No chemical test of the goods of the appellants was done to find out whether they fall under Item 19-I(J) or 19-1(2).
(iv) The Central Excise Officers visited the premises of the appellants' factory five times before raid, but no use of power was found by them.
(v) The Board held that the appellants processed fabrics falling under Item 19-1(1) and in doing so they ignored the Collector's finding that some of the goods fell under Item 19-1(2). According to appellants, they did riot process goods falling under Tariff Item 19-1(1).
(vi) The demand for duty is partly time-barred as the same was issued after six months. There was no suppression of facts warranting application of lower time-limit of 5 years.
(vii) Statement dated 20-4-74 of Mohd. Idris, which has been relied upon by the department against the appellants, was given by him in his capacity as the Manager of M/s. Jajmau Calenders and the same could not be applied to M/s. Jajmau Dyeing and Proofing Company. The statement was written in urdu.
(viii) Collector has left the determination of quantity falling under Item 19-1(1) and 19-1(2) to the Assistant Collector. The order of the Collector is entirely wrong which is not based on the charge in show cause notice. Collector's order was null and void as he did not quantify duty. Duty must be indicated clearly and specifically. The learned Advocate relied upon Bombay High Court judgment in the case of J.B.A. Printing Ink Limited v. Union of India and Ors. (1980 E.L.T. 121).
(ix) The burden of proof that the fabrics fell under Item 19-1(1) rests squarely on the department and this burden has not been discharged by them.
(x) Rule 9(2) of the Central Excise Rules, 1944 in demanding duty is not applicable in this case.
7. Smt. Dolly Saxena, learned S.D.R. appearing for the respondent-Collector has stated during the hearing that no statement of Mohd. Idris was recorded in Urdu on 20-4-74. One statement dated 20-4-74 and another on 23-4-74 were recorded from Mohd. Idris and both the statements were in Hindi. Smt. Saxena has further stated that steam was used by the appellants for the processing of cotton fabrics. Even if steam was used, duty was payable under Notification No. 128/70-CE for processing of fabrics falling under Tariff Item 19-1(1). The appellants have not proved that power was not used by them. The seized register listed at serial No.5 of Panchnama showed that the production of the firm stopped on some days in December, 1973 due to failure of power. This shows that power was used by the appellants in the processing if fabrics.
8. During the hearing before us, conflicting claims were made by the learned Advocate and the learned S.D.R. regarding the statement dated 20-4-74 of Mohd. Idris. The contention of the learned advocate was that the statement dated 20-4-74 of Mohd. Idris was in Urdu and was given in his capacity as Manager of M/s. Jajmau Calenders, in support of which he has filed an Affidavit of Mohd. Idris along with photo copy of the carbon copy of statement written in Urdu. As against this, the argument of learned S.D.R. is that no statement of Mohd. Idris was recorded in Urdu; on 20-4-74 only one statement was recorded and it was in Hindi; this statement was given by Mohd. Idris in his capacity as Manager of Jajmau Dyeing and Proofing Company. In support of her argument, a copy of the statement recorded in Hindi was filed before us. After perusing both these statements, one filed by the appellants along with affidavit of Mohd. Idris and the other filed by the department, we observe that the texts of both the statements are the same except that the heading in statement written in Urdu shows that Mohd. Idris gave the statement in his capacity as Manager of Jajmau Calenders and on the other hand, the heading of the statement written in Hindi shows that Mohd. Idris gave the statement as Manager of M/s. Jajmau Dyeing and Proofing Company. In view of the discrepancy on this vital point, we directed the learned S.D.R. for filing an affidavit by the Respondent-Collector enclosing the original statement given by Shri Mohd. Idris in Hindi. No such affidavit has been filed by the respondent nor the original statement dated 20-4-74 given by Mohd. Idris in Hindi has been produced before us. The photo copy of the Urdu statement enclosed to the affidavit of Mohd. Idris is found to be not authenticated by the signature of any Central Excise Officer. As this statement does not bear the signature of Central Excise Officer and the department also has not produced the original statement recorded in Hindi, we have considered it appropriate not to rely on either of the statements but to ignore the same altogether. We have, therefore, proceeded to decide this appeal on the basis of other evidence available before us, ignoring the statement dated 20-4-74 as well as the affidavit filed by Mohd. Idris.
9. From the arguments of the learned Advocate for the appellants, the following main questions emerge for determination by us:-
(i) Whether processing of cotton fabrics was done by the appellants with the aid of power and/or steam;
(ii) Whether duty was payable by them if the processing was clone with the aid of steam;
(iii) Whether the appellants processed fabrics falling under Tariff Item 19-1(1) or 19-I(2) or both; and
(iv) Whether the demand for duty is time-barred.
10. So far as the use of power is concerned, the stand taken by the appellants is that the processing of fabrics was carried on by them without the aid of power. During personal hearing before the Collector, Shri Motilal Jain, authorised representative of the appellants stated that steam had been used by the appellants for heating of colour solution and wax solution in jiggars. At' the stage of appeal before the Board as well as before us, they have stated that dye solution was boiled with the aid of steam, but' no power was used for operation of the machines. They have pleaded that the two electric motors with trolleys, which were seized by the Department, belonged to M/s. Jajmau Calenders, which is a different firm. The detention memo and the panchnama show that the motors were detained and subsequently seized from M/s. Jajmau Calanders. The remarks found in a seized register to the effect that the processing work stopped due to power failure on 12-12-73, 15-12-73 and 24-12-73 have also been satisfactorily explained by them. There is no evidence before us to conclusively prove that the appellants used power processing the fabrics although the detection of electric motors fitted on the trolleys may raise suspicion. In the circumstances, their contention that they processed the fabrics without the aid of power is to be accepted.
11.The processing done by the appellants consists of two parts, viz. (i) Dyeing and (ii) wax-proofing. The fabrics are first dyed and then wax-proofed in the padding mangle. During personal hearing before the Collector, the authorised representative of the appellants stated that steam was used for heating colour solution and the wax solution. Paragraphs 1 & 3 of the Order-in-appeal also show that they were using steam for the purpose of heating of colour and wax solution/bath. Boiling the dye solution and heating the wax solution are part of the dyeing and proofing process. It is thus an admitted fact that the processing was done by the appellants with the aid of steam.
12. For exemption of processing duty on duck and canvas under Notification No.128/70-CE dated 6-6-70, even the use of steam is not permitted. As the appellants used steam for processing canvas and duck fabrics falling under' Tariff Item 9-1(1), the exemption under Notification No. 128/70-CE was not available to them and as such, they were to pay the differential duty, as correctly held by the Collector and the Board. So far as the fabrics falling under Item 19-1(2) are concerned, Central Excise duty at the rates prescribed in columns (4), (5), (6) and (7) of the Second Table in the Notification No. 88/69-CE dated 1-3-69 is payable for wax-proofing, which falls within the description "Processed in any other manner". Notification No. -193/72-CE dated 2-9-72, which amended the Notification No. 88/69-CE, permits the use of steam in heating the dye bath provided the dyed fabrics falling under Item 19-1(2) are hot subjected to any further processing, including, inter-alia, padding. In the case of the appellants, the dyed fabrics were subjected to further processing of padding with the aid of steam and, therefore, the relaxation granted under Notification No. 193/72-CE dated 2-9-72 was not admissible to them. As a result, duty was chargeable on the wax-proofed cotton fabrics falling under Item 19-1(2), if the fabrics falling into this sub item were also wax-proofed by them. In the show cause notice the charge against them is that they dyed and wax-proofed 3,87,997.28 meters of canvas and duck cotton fabrics. No charge was framed in the Show Cause Notice about processing the fabrics falling under Item 19-1(2).
13. The next question which is required to be determined by us is whether the appellants processed only canvas and duck falling under Item 19-1(1) or they processed fabrics falling under both the items 19-1(1) and 19-1(2). We find that the appellants, in their letter dated 12-3-74 addressed to the Superintendent (Technical), Kanpur stated that they got grey dedsuti, Khaddar and canvas for dyeing and wax-proofing. During personal hearing before the Collector, they stated that "the fabrics processed were Dedsuti and sheeting, generally. Sometimes canvas and duck were also processed." In the detailed statements of stock submitted by them to the State Bank of India while pledging them for loan, the appellants declared the stock as Grey Canvas. From paragraph-6 of the Show Cause Notice it appears to us that the registers at serial Nos. 2,4,5,7,8,11,12 and 14 of the Panchnama relate to the appellants and those registers indicated receipt and processing of canvas and duck fabrics. At the time of personal hearing, the appellants submitted before the Collector that both coarse cloth and canvas were processed by them. The Collector has, however, stated that no evidence was furnished to prove that coarse fabrics had also been processed. It is also found that from the Order-in-original that the break up of the quantities processed was not given by the appellants. Thus, according to their own admission, the appellants processed both canvas and duck falling under Item 19-1(1) and the fabrics falling under Item 19-I(2), but they could not produce any evidence before the Collector that coarse fabrics falling under Item 19-I(2) were actually processed.
14. In the Show Cause Notice issued to the appellants it was alleged that they had processed 3,87,997.28 meters of canvas and duck fabrics valued at Rs.23,27,983.68 Raise. The Show Cause Notice refers to the scrutiny of the seized records as mentioned in paragraph 6 of the show cause notice and the statements of stock submitted by the appellants to the State Bank of India as stated in paragraph 8 of the Show Cause Notice. It has also been stated in paragraph 6 of the Show Cause Notice that those registers relate to M/s. Jajmau Dyeing and Proofing Company. It seems that in view of these facts, the Board has held that the appellants processed canvas, and therefore, the provisions of Notification No. 128/70 were applicable. In our view, this is a question of fact which should be verifiable from the statements submitted by the appellants to the Bank for pledging the stock against loan. Those statements were submitted by the appellants themselves to the Nationalised Bank at weekly intervals. Having done so, the appellants cannot now take the plea that the stock declared in those statements were actually not canvas. This plea is nothing but an attempt to escape from the proceedings drawn against them by the Central Excise Department. Paragraph 8 of the Show Cause Notice says that the statements submitted by the appellants to the Bank revealed that they pledged their grey canvas of various descriptions. It is stated \that these fabrics were processed in 1973-74. It is also stated in the said paragraph 8 of the Show Cause Notice that the entries in the ledger maintained by the State Bank of India in respect of Lock and Key Account No. 159 of M/s. Jajmau Dyeing & Proofing Company have further confirmed' that they had pledged their stock of grey canvas and finished canvas. Paragraph 10 of the Show Cause Notice shows that the details of such processed canvas and duck cloth were enclosed in Annexure-A to Annexure A.33. In the reply to Show Cause Notice, copy of which has been placed at Annexure-I, Page 40-42 of the Paper Book filed by the appellants, they did not dispute these facts. They could not also produce any evidence before the Collector to prove that any coarse fabrics had been processed by them. In paragraph 3 of the Order-in-appeal it has been stated by the Board that there was no account with the appellants to show whether they were actually processing Dedsuti or shirting. Even at the stage of second appeal before us, the appellants have not taken pains to produce any records to prove that they had processed any fabrics falling under Tariff Item 19-1(2) or that the charge of their having processed 3,87, 997.28 meters of canvas and duck cotton fabrics valued at Rs.23,27,983.68 Paise during the period from 1-4-73 to 31-3-74 was wrong. In view of these facts, we are unable to be guided by the affidavit dated 6-12-79 of Mohd. Anis of M/s. New India Water-Proof Stores, a copy of which has been filed by the appellants at page 35 of the Paper Book. This affidavit cannot obliterate the statements submitted by the appellants to their Bank and the declaration made therein. In the circumstances, we cannot accept the appellants' contention that the stock declared in the statements submitted to the Bank were not canvas. The facts discussed in this paragraph and in paragraph 13 (Supra) lead -us to the irresistible conclusion that the charge drawn against the appellants to the effect that they had processed 3,87,997.28 meters of canvas and duck cotton fabrics falling under Tariff Item 19-1 (1) of the Central Excise Tariff and valued at Rs. 23,27,983. 68 during the period from 1-4-73 to 31-3-74 stands established. We also hold that the appellants were liable to pay Central Excise duty on these processed fabrics.
15. The learned Advocate has argued that no chemical test of the goods was done to find out whether they fell under Item 19-1 (1) or 19-I (2). As already discussed earlier, the appellants themselves declared the goods as canvas and duck in the statements submitted to the Bank. The records seized from them also indicated that the goods were canvas and duck which fell under Item 19-I (1) of the Tariff during the relevant time. There was no scope for any doubt about the type of the cloth and as such, we are of the view that chemical test of cloth was not necessary in the facts and circumstances of the case.
16. The next point of argument of the learned Advocate is that demand for duty was time-barred. Show cause notice was issued to the appellants on 15-10-1974 and the period covered by the notice was 1-4-73 to 31-3-74. He has stated that there was no allegation of suppression of facts or wilful mis-statement etc. in the show cause notice warranting application of the longer time-limit of 5 years. He has relied upon three decisions in support of this argument. These decisions are as follows:
(i) Decision of the CEGAT in the case of Jay Engineering Works Limited V. Collector of Central Excise, Calcutta, 1985 (21) ELT 299 (Tribunal).
(ii) Judgment of Madras High Court in the case of Light Roofing Limited V. Superintendent of Central Excise, Kancheepuram and Ors. (1981 E.L.T-738).
(iii) Customs, Excise and Gold (Control) Appellate Tribunal's order No. 59/85-B dated 30-1-85 in Appeal No. ED (SB) T/A. No. 2003/83 -B, (Integrated Process Automation Private Limited, Bangalore V. Collector of Central Excise, Bangalore). 1985(21) ELT 227 (Tribunal). The plea of time-bar was not taken by the Appellants before the Collector who adjudicated the case as well as before the Board who decided the first appeal of the appellants. This plea has been taken for the first time at the stage of Revision Application (Now appeal before us). The contention of the learned Advocate is not tenable. We find from paragraph 12 of the Show Cause Notice that the appellants were asked to explain why duty on the aforesaid processed Canvas and Duck cloth at the appropriate rate should not be demanded under Rule 9(2) of the Central Excise Rules, 1944. Duty was demanded in this case under Rule 9(2) of the Central Excise Rules. At the relevant time, there was no time limit for demanding duty under Rule 9(2) of the Central Excise Rules, 1944. Secondly, we find from the show cause notice that the facts were clearly narrated in the Show Cause Notice alleging that the appellants processed canvas and duck cloth without applying for a Central Excise licence as required under Rule 174 of the Central Excise Rules. They did not submit classification list and price list in respect of cloth processed in their factory, as required under Rule 173-B and 173-C; they did not maintain proper accounts, and removed such processed fabrics without issue of valid gate passes as required under Rules 173-G, 52-A and 53; and they removed the processed canvas and duck fabrics without payment of Central excise duty as required under Rule 9 and 173-F of the Central Excise Rules. The Canvas and Duck cloth was processed by the appellants and removed from the factory without payment of duty and without observing the provisions of the Central Excise Rules. The fact that they were processing canvas and duck fabrics was not brought to the notice of the Central Excise authorities prior to 12-3-1974. We, thus, find that there were clear allegations in the Show Cause Notice that the appellants did not apply for central excise licence, did not file any classification list and price list, removed goods without payment of duty and did not observe 'any provision of the Central Excise Rules. The suppression of facts and clandestine removal of the goods without payment of Central Excise duty should, therefore, be construed as the main allegation in the show cause notice although the words "Suppression of facts" were not specifically mentioned therein. These allegations stand established. There is no dispute that the decisions cited by the learned Advocate lay down the proposition that for extended period of time limit of 5 years there should be ingredients of suppression of facts, misstatement, fraud or clandestine removal of the goods etc. In the present case before us, ingredients of suppression of facts and clandestine removal of the goods are satisfied by the facts and details stated in show cause notice. In our view, it is not necessary that the words 'suppression of facts' etc. should specifically find place in the show cause notice. It is enough if the facts in the show cause notice bring out suppression of facts and clandestine removal of the goods. As already indicated in this paragraph notice in this case was issued under Rule 9(2) and during the relevant period, there was no time-limit prescribed in that Rule for demanding duty. In the circumstances, the argument of the learned Advocate that the demand for duty in this case is time-barred, is not tenable.
17. We shall now deal with the point mentioned against item (viii) of paragraph-6 of this order. The plea taken by the learned Advocate is that the Collector did not quantify the amount of duty and as such, his order is null and void. We are to consider the facts and circumstances in which the Collector has not quantified the amount of duty and left it to be calculated by the Assistant Collector. This was done by the Collector because he wanted to give maximum benefit to the appellants as permissible under law. He has stated in the Order-in-original that processing duty at different rates was payable depending upon whether the basic fabric was of powerloom or handloom. The fact whether cloth processed by them were of handloom or powerloom was best known to the appellants. No doubt, the Collector could determine the duty payable by the appellants by applying the highest rates of duty, but he did not adopt such a course with a view to giving maximum benefit to the appellants and allowing them an opportunity to produce evidence before the Assistant Collector that they were liable to pay lower rate of duty. This being the position, it will be taking an extreme view to say that the Collector's order was null and void because he did not quantify the duty. The learned Advocate has relied upon the decision of Bombay High Court in the case M/s. J.B.A. Printing Ink Limited reported in 1980 E.L.T. 121. The said case is, however, distinguishable from the case of the appellants. The show cause notice in the case of J.B.A. Printing Ink Limited, was issued under Rule 10 of the Central Excise Rules which specifically laid down that the amount of duty should be quantified in the notice. In the present case, duty was demanded under Rule 9 (2) in which there was no stipulation that duty should be specifically quantified. Under Rule 10 of the Central Excise Rules, there is mandatory provision for quantifying the amount of duty. As that mandatory requirement was not complied with in the case of J.B.A. Printing Ink Limited, the Hon'ble High Court set aside the main order in that case. The situation is completely different in the present case. In this context, we would also like to observe that Hon'ble Delhi High Court took a contrary view in this matter in the case of Hindustan Aluminium Corporation Limited V. Superintendent of Central Excise, Mirjapur and Ors., reported in 1981 E.L.T.-642 (Del.) in which Hon'ble High Court has held that the purpose of a show cause notice is to indicate the amount of duty payable by the petitioner and therefore, if the show cause notice indicates the difference between the duty demanded and the duty not paid that would be sufficient compliance of Rule 10. But in case, the amount of duty is not specified the petitioner can enquire the amount of duty payable from the department before giving suitable reply to the show cause notice. In view of what has been stated in this paragraph, the plea of the learned Advocate made on this account is rejected.
18. We shall now deal with the argument of the learned Advocate on the burden of proof. His plea is that burden of proof to show that fabrics fell under Item 19-1 (1) rests on the department and this burden has not been discharged. He has cited two decisions in support of his arguments. One decision relates to the case of Smt. Sindhu Ganesh Bali and Ors. v. Collector of Central Excise, Poona, vide this Tribunal's Orders No. 113 to 122/85 dated 25-3-85. The other decision is the judgment of Bombay High Court in the case of Swan Mills Limited and Anr. v. H.R. Amarnani and Anr., reported in 1982 E.L.T. 445 (Bombay). We are, however, to observe that the facts in the case of Smt. Sindhu Ganesh Bali are quite different from the present case. Therefore, the conclusion drawn by this Tribunal in that case will not be relevant in the present case. In the case of Sindhu Ganesh Bali this tribunal held that evidence before the Collector was insufficient to sustain findings that goods were furnishing fabrics and therefore, demand for duty and penalty deserved to be set aside. In the present case, there is clear evidence to prove that the appellants processed (Dyed and Wax-proofed) canvas and duck, as discussed in this order. On the other hand, the appellants could not produce any documentary evidence to prove that they did not process such fabrics or that such processed fabrics fell under Item 19-1(2). So, the above decision of the Tribunal is not applicable in the present case. In the case of Swan Mills Limited and Anr., it was held by the Hon'ble Bombay High Court that burden of proof is primarily on the assessing authority to establish whether a particular product fell under one Tariff Item or other. In the present case before us, the burden of proof that the appellants' processed canvas and duck fabrics with the aid of steam' without observing the provisions of Central Excise Rules and removed the processed fabrics from the factory without payment of central excise duty has been clearly proved.
The learned Advocate further argued that statutory authority should act fairly and not arbitrarily. He cited the judgment of Hon'ble Kerala High Court in the case of Heveacramb Rubber Private Limited V. Superintendent of Central Excise (1983 E.L.T.-1685) (Kerala). In this case of the appellants, we do not think that lower authorities acted contrary to the provisions laid down in this judgment and acted arbitrarily. They have given reasons to justify their decisions. Similarly, while deciding this appeal, we have discussed the various points argued before us and then we have given our considered views taking into account the facts and circumstances and evidence before us.
19. The learned Advocate has pleaded that Rule 9 (2) of the Central Excise Rules, 1944 is not applicable in this case. He has quoted the judgment of Hon'ble Supreme Court in the ease of N.B. Sanjana, Assistant Collector of Central Excise, Bombay and Ors. v. The Elphinstone Spinning and Weaving Mills Company Limited (1978 E.L.T. J-399) in which their Lordships held that to attract Sub-rule (2) of Rule 9, the goods should have been removed in contravention of Sub-rule (1), i.e. clandestinely and without assessment. If the goods have been removed with prior permission of the excise authorities, Rule 9 (2) will not apply. In the present case before us, the processed fabrics were removed from the factory clandestinely and not with the prior permission of the Central Excise authorities. Rule 9 (2) was, therefore, correctly applied by the Department, and the department's action is quite in conformity with the judgment of the Hon'ble Supreme Court. Shri Gujral has also relied on the decision of Madras High Court in the case of Murugan & Company, Pudukottai V. Deputy Collector of Central Excise, Tiruchirapalli and Others (1977 E.L.T. 193) in support of his argument that Rule 9 (2) was not applicable in the present case. It appears to us that this judgment of the Hon'ble Madras High Court does not help the case of appellants. It was held by Madras High Court in that judgment that Rule 9 (2) cannot be invoked where the authorities entertained a doubt as to whether the goods are excisable or not and did not object to clearance of the goods without payment of duty. In the case of appellants before us, none of these facts is in existence. The appellants did not bring to the notice of the Central Excise authorities that they were processing canvas and duck with the aid of steam and the central excise authorities had no occasion to entertain any doubt about excisability of the goods or to object to their clearance without payment of duty.
20. We have discussed all the points which were argued before us by the learned Advocate for the appellants and we have given our findings thereon.
21. In the light of our discussions, we do not find any justification to interfere with the Order-in-appeal passed by the Central Board of Excise and Customs, New Delhi. The same is, therefore, upheld and the appeal is hereby dismissed. We have held that the appellants processed 3,87,997.28 Meters of canvas and duck cotton fabrics valued at Rs.23,27,983. 68 paise which they removed from the factory without payment of Central excise duty. The appellants are liable to pay central excise duty thereon. In this regard, we uphold the view taken by the Board. We, however, direct that if the duty calculated on the basis of this order at the rate applicable to Canvas and Duck on the entire quantity of 3,87,997.28 meters valued at Rs. 23,27,983.68 paise is found to be higher than the actual amount of duty calculated on the basis of the Order-in-Original passed by the Collector, the amount of duty as per our order should be limited to the amount of duty calculated as per Collector's Order-in-original.
22. The penalty has already been reduced by the Board from Rs. 50,000/- to Rs. 25,000/-. Further reduction of penalty is not warranted in the facts and circumstances of the case. The penalty of Rs. 25,000/- is, therefore, confirmed.
23. The appeal is dismissed in the above terms.