2006 (3) TMI 680 - AT - Central Excise

Summary

Issues:
- Seizure of processed fabrics and documents from factory premises
- Allegations of clandestine removal of fabrics
- Demand for duty and proposed confiscation of fabrics
- Cross-examination of sub-contractors and Shri Rana denied
- Second show cause notice based on similar facts
- Adjudication and orders by the Commissioner
- Duty demand, confiscation, and penalties imposed
- Lack of evidence regarding procurement and use of materials
- Machinery capacity and quantity of fabrics processed disputed
- Principle of natural justice denied

Seizure of Processed Fabrics and Documents:
The case involves the seizure of processed man-made fabrics and documents from the appellants' factory premises by preventive officers due to discrepancies in gate passes and excess stock. Additionally, various documents and hand-written pages were seized, including file No. 73 containing details of fabrics processed by labor contractors.

Allegations of Clandestine Removal of Fabrics:
The show cause notice alleged clandestine removal of fabrics based on entries in file No. 73, demanding duty amounting to Rs. 1,70,86,920.65. The Commissioner adjudicated the notice, demanding duty of Rs. 1,21,01,153.41, confiscating fabrics and imposing penalties, primarily relying on statements and contents of file No. 73.

Cross-Examination Denied and Lack of Evidence:
The appellants requested cross-examination of sub-contractors and Shri Rana, who maintained file No. 73, to clarify entries and facts, but the request was rejected. The Commissioner admitted that apart from statements and contents of file No. 73, there was no other evidence for establishing clandestine removal, emphasizing the necessity of cross-examination for testing the veracity of statements.

Second Show Cause Notice and Similar Facts:
A second show cause notice was issued based on similar facts, alleging duty demand of Rs. 1,77,80,128/- for processing fabrics, despite the appellants' explanation of engaging main contractors who then engaged sub-contractors. The appellants argued that the second notice was unjustified and motivated, as all other facts remained the same.

Machinery Capacity and Lack of Evidence:
The appellants disputed the enormous quantity of fabrics allegedly processed, highlighting the machinery capacity, working days, and evidence regarding production. They emphasized the lack of evidence such as availability of raw materials, involvement of transporters, and customer statements, questioning the basis for duty demand.

Principle of Natural Justice Denied and Remand:
The Tribunal remanded both cases back to the Commissioner, emphasizing the denial of the principle of natural justice due to the denial of cross-examination. It directed the Commissioner to allow cross-examination of sub-contractors and Shri Rana, enabling a fair determination of facts and subsequent reasoned orders based on comprehensive evidence.

In conclusion, the judgment addresses issues related to seizure, clandestine removal allegations, denial of cross-examination, unjustified second notice, lack of evidence, machinery capacity disputes, and the importance of upholding natural justice principles in legal proceedings. The remand to the Commissioner aims to ensure a fair assessment based on thorough examination and evidence presentation.