K.S.Venkataramani, Member (T) -
(1.) THIS appeal is directed against the order No. 1/1986 dated nil passed by the Collector of Central Excise, Aurangabad by which he had demanded a duty of Rs. 8,43,621.36 and had also imposed a penalty of Rs. one lakh on the appellants under Rules 173Q and 9(2) of Central Excise Rules, 1944 and by which he had also ordered confiscation of rubberised cotton hose pipes seized from the appellants premises levying a fine in lieu of confiscation of Rs. 10,000/ -. The brief facts are that on information that the appellants manufactured rubberised hose pipes with the aid of power and are clearing them without payment of duty, the Preventive staff of the Collectorate Headquarters visited the appellants' premises on 23 -8 -1984. Five other units were found working under the same compound, namely, (1) M/s. Patel Industries; (2) M/s. Hose -Pipe Industries; (3) M/s. Parbhani Enterprises; (4) M/s. Laxmi Industries; and (5) M/s. Maharashtra Pipe Industries. On 24 -8 -1984, Sh. Nilesh Kumar R. Patel, partner of the appellants, gave a statement saying that cotton hose pipe is supplied by other four units and after rubberising/lining a hose pipe is despatched by them to outside parties as per the directions of grey hose pipe manufacturers, after charging labour charges for rubberising. He also said that they do not have separate electric connection for working compressor and electric motor and that the power connection is obtained from the premises of M/s. Patel Industries. He, further, stated that since April, 1984, they have installed a small electric motor of 1/8 H.P. which is used for stirrer for mixing rubber compound. He also admitted that he did not inform the Central Excise Department about the manufacture of rubberised/rubber lined cotton hose pipes with the aid of power and had not taken licence. One Sh. B.N. Kulkarni, Manager of M/s. A.P. Patel and Co., in his statement on 12 -9 -1984, said that he had transferred one compressor with one electric motor to the appellants. Sh. Mohammed Abdul Najib, Proprietor of M/s. Ruby Agencies, Parbhani on 12 -9 -1984 stated that he had issued a Credit Bill to the appellants on 10 -4 -1984 for sale of electric motor of 1/8 H.P. Sh. Raghuvir Patel on 27 -10 -1984, in his statement, stated that on request of the appellants, his unit had supplied electricity to them through their power meter. On a further scrutiny of their Profit and Loss Account for the year ending 31 -3 -1984, the Department worked out the total receipt of grey cotton hose pipe and rubberising charges collected by the appellants and proceedings were initiated against the appellants by issue of a show cause notice dated 20 -2 -1985 for demanding duty of Rs. 8,43,621.36 in terms of Rule 9(2) of Central Excise Rules, 1944 read with Section 11A of the Central Excises and Salt Act, 1944 and also proposing to confiscate the quantity of hose pipes seized from their premises. The Collector's order shows that after furnishing an interim reply seeking time of 8 weeks for submitting detailed reply, the Ld. Counsel for the appellants had asked for extension of time which was also granted and since no detailed reply was forthcoming after further extension, the Collector proceeded to adjudicate the matter ex parte. He held the charges as established, demanded duty, confiscated the seized goods and imposed penalty on the appellants as stated above.
(2.) SH . H.C. Jain, Ld. Advocate appearing for the appellants, contended that the Collector has violated the principles of natural justice in this case by adjudicating the case ex parte without giving an opportunity of personal hearing in spite of specific request made by them in their letter to the Collector. He relied upon the case law reported in 1990 (28) ECR 158 in the case of Chandra Industries v. Collector of Central Excise, wherein the Tribunal held that where no cross -examination was allowed, principles of natural justice have been violated. In this case also, the appellants have specifically asked for such cross -examination, which has not been granted. He also relied upon the case law reported in 1989 (42) ELT 559 (Ker.) in the case of Sunrex Private Ltd v. Union of India in which the High Court held that the right of hearing cannot be denied to the party even if the appellants had not filed the written statement of reply. Therefore, since the appellants had not been given adequate opportunity of defence and cross -examination of witnesses, the Ld. Counsel pleaded that the case should be remanded to afford them such an opportunity. On merits, the Ld. Counsel submitted that only one electric motor was used for stirring operations and the compressor was used only for blowing operations. Therefore, it was contended that there was no process of manufacture carried on with the aid of power. The Collector's order merely follows the grounds set out in the show cause notice. There is no finding on the use of power, electricity consumed and the electricity bills paid by the appellants. The Ld. Counsel contended that even the statement of Nilesh Kumar Patel dated 24 -8 -1984 would only say that they have started using electric motor from April, 1984. In such a case, the duty demanded for an earlier period is questionable. It was also urged that the compressor acquired by the appellants was a condemned one and not serviceable and the electric motor was also old. It was also submitted that if the goods are classified under Item 16A of the CET, they will be eligible for duty exemption under Notification 18/74. The further submission was that the demand is time -barred because the show cause notice had been issued on 20 -2 -1985 covering the period from 1 -4 -1983 to 23 -8 -1984 without any allegation of suppression of facts. It was, further, submitted that the Rubber Technician, Sh. V.K. Jangli, in his statement on 23 -11 -1984, had said that only since April, 1984, 1/8 H.P. motor was fixed for stirring because of occasional shortage of labour and that the motor had been removed permanently at the end of August, 1984. He had also said that the compressor was also removed in August, 1984 because it was found unsuitable. It was, therefore, pleaded that the appellants should be given a fair opportunity of stating their case before the Collector for the purpose the case may be remanded.
(3.) SH . Jayaraman, the Ld. S.D.R., contended that there has been no violation of principles of natural justice. The show cause notice was issued on 20 -2 -1985 for which interim reply was sent by the appellants on 23 -4 -1985 in which the circumstances seeking time was only that the Ld. Counsel needed time. The Collector has given them ample opportunities and has ultimately passed the adjudication order much later in the year 1986 November. With reference to the case law, in this regard, the Ld. S.D.R. pointed out that on facts, in none of them there was such a long time interval between the show cause notice and the adjudication as in the present case. In the case of Chandra Industries, cited by the appellants, there was a specific agreement by the Department to offer cross -examination which was not adhered to whereas here even, in spite of further extension of time, the appellants had not come forward with their detailed reply. On merits, the Ld. S.D.R. pointed out that the Collector's order is passed on the statement of Sh. Nilesh Kumar Patel, partner of the appellants, who has clearly admitted the use of power. On limitation also, a full perusal of the show cause notice would indicate that suppression is alleged and the demand is under Rule 9(2) read with Section 11A with a detailed annexure on facts leading to the demand. The Ld. S.D.R. pointed out that the case was detected as a result of preventive check on the appellants' premises. The appellants had not disclosed the use of electric motor and compressor.
Submissions made by the Ld. Counsel and the Ld. S.D.R. have been carefully considered. The first point, in this case, is whether there is any scope for remand of the case to the Collector on the ground that the appellants had not been given adequate opportunity of defence. The records show that there is only one interim reply dated 23 -4 -1985 to the show cause notice given by the appellants, in which they have stated that they had desired a personal hearing and cross -examination of all the witnesses such as Panchas, Seizing and Investigating Officers and others on whose evidence reliance may be placed in adjudicating the case. It is, further, stated in that letter that they denied the charges and that the detailed reply, if found necessary, will be filed within the extension of time requested in that letter. The records also show that the Collector had given them time as requested and further extension. The Collector's observation, in this regard, are as follows: "No reply was received from the party. The consultant of the party, Sh. H.C. Jain furnished an interim reply and requested for granting time of about 8 weeks, for submitting a detailed reply to the show cause notice. As per the request of the consultant, extension of time was granted to reply to the show cause notice and he was informed on 2 -5 -1985 that the reply in the matter should reach this office on or before 30 -6 -1985. Then the Advocate Sh. H.C. Jain, was granted further time as communicated to him on 29 -10 -1985, 13 -12 -1985, 12 -3 -1986, and 29 -4 -1986 to file his reply.";