1975 (10) TMI 33 - HC - Central Excise

Summary

Issues Involved:
1. Validity and legality of the order dated 3rd/5th August 1965 passed by the Officer on Special Duty, Central Excise.
2. Alleged breach of principles of natural justice due to the lack of opportunity to cross-examine Omprakash Kedia.
3. Reliance on third parties' admissions regarding the genuineness of entries in Kedia's books of account.

Issue-wise Detailed Analysis:

1. Validity and Legality of the Order:
The petitioners challenged the order dated 3rd/5th August 1965, which levied excise duty and penalties under the Central Excise and Salt Act, 1944. This order was confirmed by the Central Board of Excise and Customs on 20th February 1968 and further by the Union of India on 5th May 1970. The petitioners alleged that the transactions involving the purchase of cotton cloth were genuine sales and not manufacturing activities as claimed by the Excise authorities. The investigation revealed that the petitioners had supplied cotton yarn to M/s. Sushil Trading Co. and received manufactured cloth on payment of weaving charges, which, according to the Excise authorities, made them manufacturers under Section 2(f) of the Central Excise and Salt Act, 1944.

2. Alleged Breach of Principles of Natural Justice:
The petitioners contended that they were not given an opportunity to cross-examine Omprakash Kedia, whose statements and books of account were relied upon by the Excise authorities. It was argued that Kedia was not present during the personal hearings, nor were his statements affirmed or subjected to cross-examination. The court examined whether the absence of cross-examination constituted a breach of natural justice. It was noted that the petitioners were informed that Kedia's statements and books would be used as evidence, and they had the opportunity to request his presence for cross-examination but chose not to. The court referred to various precedents, including Union of India v. T.R. Varma (A.I.R. 1957 S.C. 882) and State of Mysore v. Shivabasappa Shivappa Makapur (A.I.R. 1963 S.C. 375), to conclude that the principles of natural justice were not breached as the petitioners had a fair opportunity to explain and comment on the evidence.

3. Reliance on Third Parties' Admissions:
The petitioners argued that the reliance on third parties' admissions regarding the genuineness of entries in Kedia's books was improper, as they were not informed about these admissions nor given an opportunity to scrutinize or comment on them. The court acknowledged that the reliance on third parties' admissions was irrelevant material but emphasized that the order would still be valid if it could be sustained on the other material available. The court found that even excluding the irrelevant material, the remaining evidence, including the tallying of entries in the books of account with the invoices, supported the conclusion that the petitioners had engaged in manufacturing activities. The court cited Zora Singh v. J.M. Tandon (A.I.R. 1971 S.C. 1537) and The State of Maharashtra v. Babulal Kriparam Takkamore (69 Bom. L.R. 544) to support the view that an order based on some irrelevant material could still be upheld if the relevant material was sufficient to sustain the conclusion.

Conclusion:
The petitions were dismissed, and the rule in each was discharged. The court concluded that the principles of natural justice were not breached, and the reliance on irrelevant material did not affect the validity of the order, as the remaining evidence was sufficient to support the conclusion.