2005 (2) TMI 718 - AT - Central Excise

Issues Involved:
1. Clandestine manufacture and clearance of Coated Cotton fabrics (CC fabrics).
2. Wrongful availing of Modvat credit on PVC Resin.
3. Confiscation of seized CC fabrics.
4. Imposition of penalties on the company and its directors/employees.
5. Adherence to principles of natural justice in adjudication.

Issue-wise Detailed Analysis:

1. Clandestine Manufacture and Clearance of CC Fabrics:
The central issue was the alleged clandestine manufacture and clearance of CC fabrics by M/s. Meenam Rexine Pvt. Ltd. (MRPL) using unaccounted raw materials, resulting in a duty demand of Rs. 1,02,44,715/-. The original Show Cause Notice (SCN) dated 28-9-93 was based on the alleged unaccounted excess quantity of PVC Resin used for the clandestine manufacture of 9,15,825 Sq. meters of CC fabrics. The Tribunal remanded the case for de novo adjudication, directing the adjudicating authority to notify the quantitative basis (input-output ratio) of demand of duty. However, the Commissioner, in the remanded proceedings, demanded duty based on the input-output ratio of Chlorinated Paraffin Wax (CPW) to Rexin cloth, which was beyond the scope of the original SCN. The Tribunal found that the Commissioner misdirected himself by not considering the original basis of the SCN and held that the remand order had left all issues open for re-adjudication.

2. Wrongful Availing of Modvat Credit on PVC Resin:
The SCN also alleged that MRPL wrongfully availed Modvat credit of Rs. 13,22,069/- on PVC Resin. This issue was part of the broader allegations of clandestine manufacture and clearance. The Tribunal's remand order implied that all issues, including this one, were to be reconsidered in the de novo adjudication. The Commissioner, however, focused solely on the input-output ratio of CPW to Rexin cloth, ignoring the original allegations regarding PVC Resin.

3. Confiscation of Seized CC Fabrics:
The SCN had proposed the confiscation of 10,586 L.M. and 800 Kgs. of CC fabrics seized from MRPL's factory. The Tribunal, in its remand order, confirmed the confiscation and the redemption fine of Rs. 1,00,000/-, considering it not excessive. This issue was settled and not subject to further adjudication in the remanded proceedings.

4. Imposition of Penalties:
Penalties were imposed on MRPL and its directors/employees under Rules 173Q and 209A. The Tribunal's remand order indicated that penalties should be reconsidered based on the final duty demand determined in the de novo adjudication. The Commissioner, however, imposed penalties based on the input-output ratio of CPW to Rexin cloth, without addressing the original basis of the SCN. The Tribunal held that the Commissioner should have considered both the original and the alternative bases for quantifying the duty and determining penalties.

5. Adherence to Principles of Natural Justice:
The Tribunal emphasized that the principles of natural justice were violated as the basis for quantifying the duty demand was shifted without notifying the assessee. The remand order required the adjudicating authority to notify the input-output ratio to the assessee and provide an opportunity for a fair hearing. The Tribunal found that the Commissioner failed to adhere to these principles by not considering all subsisting issues and by not notifying the co-noticees of any fresh allegations.

Conclusion:
The Tribunal set aside the impugned order and remanded the case for fresh adjudication. The Commissioner was directed to re-adjudicate the case in conformity with the remand order, considering all subsisting issues, and providing a reasonable opportunity for the parties to be heard. The Tribunal emphasized the need for adherence to the principles of natural justice and directed the Commissioner to complete the adjudication within six months.

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