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3.1 The learned Advocate submitted that the impugned order is based on erroneous inferences drawn from the terms of the DGS&D rate contract and the statement of the dealers that the laminated sheets supplied under DGS&D rate contract were all goods manufactured in the factory and clandestinely removed to Delhi; that it has been the consistent view of the Tribunal that to allege and establish clandestine removals, it has to be supported by evidence with regard to purchase of inputs, production, source of founds, sale and receipt of consideration [Ambica Chemicals v. CCE, 2002 (148) ELT 191 (T)]; that they had requested the cross-examination of all the dealers and Shri Gairola, Ex-General Manager of their company; that only Shri I.C. Khanna, Deputy Director, Quality Assurance, DGS&D, New Delhi turned up for cross-examination; that thus reliance on the statements of all the persons who did not turn up for cross-examination is totally uncalled for since the same have not been tested by cross-examination and hence the Order is liable to be set aside. Reliance has been placed on the following decisions:

4.2 He said that the Commissioner has also relied on letter dated 29.12.95 of RITES that the inspection was carried out at factory premises; that RITES was not involved in respect of orders of DGS&D on rate contract on which demand of duty has been confirmed; that the Adjudicating Authority has not dealt with this factual aspect of the matter.

4.3 He further mentioned that according to the case of the Department, laminated sheets under the DGS&D contract are to be of "Paras" brand and therefore, the laminated sheets procured from the market having brand name other than "Paras" could not have been supplied from Delhi godown and contended that the contract did not stipulate where and how the brand name is to be affixed; that "Paras" brand is affixed in the factory on the laminated sheets manufactured as also in the Delhi godown on the laminated sheets procured from the market through screen printing (Pages 1052 and 1053 of the Paper Book); that thus the traded goods bore the brand name of "Paras" and the term specifying "Paras" brand cannot be the basis to infer that there was manufacture and clandestine removal of laminated sheets from factory over and above the actual products in R.G.I. 4.4 He said that the Commissioner has contended that the DGS&D contracts were not awarded for supply of goods manufactured by others from the market and submitted that there is no such restriction in the Rate Contracts; that thus it cannot bring home the charge that there was clandestine removal; that in the case of two dealers, namely, M/s. Kumar Industries and M/s. Vardhana Industries, the department had alleged that their sale invoices were fake; that they had shown that they had paid the money by cheque and the dealers had themselves not disputed the supply and invoices raised by them on the Appellants; that all sales were assessed under Sales Tax and the amount thus paid has not been refunded to them showing that the transactions with these two dealers went through.

6.1 Countering the arguments, Shri O.P. Arora, learned S.D.R, submitted that the Rate Contract awarded by DGS&D to the Appellants for supply of laminated sheets of 1.5 mm thickness and 3.0 mm thickness of "Paras" brand contained the conditions that the goods would be supplied Ex-factory Bhiwadi (Distt. Alwar, Rajasthan) and source of manufacturing would be indigenous and that "for all supply against the R/C inspection will be carried out at your works at Plot No. B-492, RIICO Industrial Area P.O., Bhiwadi, Distt. Alwar (Rajasthan);" that the scrutiny of the Misc. file recovered from factory premises of the Appellants has revealed that the joint inspection was carried out by the representatives of Rail Coach Factory, DGS&D and the Appellants and a report was drawn on inspection of the manufacturing process, quality control arrangement, process control and procedure of testing, etc; that such inspection report clearly shows that the contract with Rail Coach Factory was for the Appellants' own manufacture only; that the Appellants have to comply with the conditions specified in the Rate Contract which goes to show that the goods were manufactured by them for being supplied to the Railways; that the rate contract awarded to them by the DGS&D cannot be ignored. He relied upon the decision in the case of Cambridge Woollen Mills v. CCE, Chandigarh, 2000 (120) ELT 687 (T), wherein it has been held by the Tribunal that when the assessee entered into a contract for supply of yarn to DGS&D of its "own manufacture" and of composition, 70% wool and 30% nylon and the composition declared in the gate pass was nylon content less than 1/6 of total fibre content, the assessee cannot claim that they could procure fibre or yarn from outside and supply it to the DGS&D in terms of the contract and that they were to supply the stores of their own make. Reliance has also been placed on the decision in Abrol Engineering Co. P. Ltd. v. CCE, Chandigarh, 1996 (83) ELT 534 (T) and A.K. Industries v. CCE, Calcutta-II, 2001 (138) ELT 351 (T) wherein the Tribunal has upheld the Adjudication Order of confiscation of goods which were in the process of being removed at the time of visit of the officers without reflecting them in the R.G.I and the explanation that the same were being sent out for inspection was not accepted by the Authorities by observing that as per the contract of the Appellants with their customers; inspection had to take place in the Appellants' own factory.

9. We have considered the submissions of both the sides. The major demand of duty has been confirmed against the Appellants on the ground that the laminated sheets could not have been supplied by the Appellants by purchasing the same from dealers as rate Contract awarded to them contained the conditions that goods should be of their own make - PARAS brand and these were to be inspected at factory and the dealers, besides some of them being non-existent, were not dealing in laminated sheets of 3 mm thickness. The Revenue has thus presumed that the goods sold under DGS&D Rate Contract under the cover of Delhi Godown bills were clandestinely manufactured in their factory at Bhiwadi and removed without payment of duty. On the other hand, the Appellants have contended that the laminated sheets were purchased at Delhi from various dealers, Paras Brand name was printed on these purchased goods through the process of screen printing, samples were taken to Bhiwadi factory for quality test and afterwards goods were despatched directly from Delhi godown to various destinations. The appellants have brought on record the transport documents in support of their contention that the goods against Rate Contract were despatched from Delhi godown. The Revenue has not brought out any material on record to contradict the said documents evidencing transport of the goods from Delhi godown. They have also brought on record the certificate given by the Transport Company regarding transporting of goods from New Delhi godown. Nothing has also been adduced to show that the laminated sheets, after being manufactured in their factory at Bhiwadi, were first brought to Delhi and then from Delhi, these were transported to various destinations. The Revenue has also not rebutted the submissions of the Appellants that the laminated sheets were procured against ST-I form which is for re-sale under the Delhi Sales Tax Act, 1975. Their contention that "D" form was given by Railways on sale of traded goods to them has also not been controverted by the Revenue. The learned Advocate has also shown that in the Rate Contract for 1995-96 in column for Place of Inspection, Delhi Godown has been mentioned specifically. The Revenue has relied upon the letter dated 9.9.96 of DGS&D wherein the Deputy Director, Quality Assurance, has mentioned that the inspection at the firm's works at Bhiwadi where testing facilities were available and inspection was never carried out at firm's godown at New Delhi. But the said Dy. Director never carried out any inspection himself. This has been brought out by the Appellants clearly and specifically in the Cross-examination of the Deputy Director (Shri I.C. Khanna), wherein he answered in negative when a question was put to him whether did he personally conduct any inspection and whether was he aware that samples were taken from Delhi godown to the Appellants' factory at Bhiwadi. We observe that no statement of any of the members of the Inspection Team has been recorded by the Revenue, though Shri Balraj Chugh, Marketing Manager, has deposed in his statement on 12.6.96, on the day of search itself that "materials are inspected at our works & Delhi Godown." We, therefore, agree with the submissions of the learned Advocate that the terms of the DGS&D Rate Contract cannot be the basis to infer that there was manufacture and clandestine removal of laminated sheets from the factory of the Appellants.