2007 (1) TMI 191 - HC - Central Excise

Issues Involved:
1. Quashing of orders by the second respondent.
2. Classification, valuation, and determination of excise duty.
3. Modus operandi of issuing multiple sets of invoices.
4. Findings based on non-maintenance of private records and blow room practices.
5. Opportunity to rebut findings.
6. Mis-declaration of goods and fiscal statutes.
7. Judicial review under Article 226 of the Constitution of India.
8. Rejection of reference under Section 35G of the Central Excises and Salt Act, 1944.

Detailed Analysis:

1. Quashing of Orders by the Second Respondent:
The petitioner sought to quash the orders of the second respondent in Final Order Nos. 572, 571/99, dated 16-3-1999, and Ref. Order Nos. 101, 100/99, dated 5-10-1999. The petitioner argued that the second respondent's findings were based on reasoning independent of the first respondent's order, which was not the basis of the show cause notice or adjudication.

2. Classification, Valuation, and Determination of Excise Duty:
The case involved the classification and valuation of polyester/viscose yarn and the determination of excise duty. The petitioner was found to be adopting a modus operandi of issuing multiple sets of invoices, leading to discrepancies in excise duty paid. The Tribunal confirmed the differential duty of Rs. 44,32,897.61 and imposed penalties on the company's directors.

3. Modus Operandi of Issuing Multiple Sets of Invoices:
The authorities discovered that the petitioner issued proper delivery orders and invoices to customers while maintaining separate invoices with incorrect descriptions for office purposes. This resulted in paying lesser excise duty than required. The Tribunal found it hard to believe that such collusion could continue over a long period under the supervision of an experienced resident director.

4. Findings Based on Non-Maintenance of Private Records and Blow Room Practices:
The petitioner contended that the findings on non-maintenance of private records and blow room practices were based on no evidence. However, the Tribunal did not solely rely on these findings. It observed that the petitioner did not follow the industry practice of assigning lot numbers at the blow room stage, which affected the accuracy of raw material accounts.

5. Opportunity to Rebut Findings:
The petitioner argued that they were not given an opportunity to rebut the findings based on new grounds. The Tribunal, however, provided sufficient reasons for rejecting this contention, stating that the petitioner invited the observations by raising specific contentions.

6. Mis-Declaration of Goods and Fiscal Statutes:
The mis-declaration of two lots was established by the chemical analyst's report and witness statements. The fiscal statute contained measures for addressing mis-declaration, non-declaration, and under-valuation. The Tribunal upheld the findings of mis-declaration and manipulation of invoices.

7. Judicial Review under Article 226 of the Constitution of India:
The Court emphasized that judicial review under Article 226 is not an appellate jurisdiction but a review of the Tribunal's order for arbitrariness, discrimination, or mala fide. The Court found that all due formalities were followed, and the petitioner's partial acceptance of invoice manipulation was considered.

8. Rejection of Reference under Section 35G of the Central Excises and Salt Act, 1944:
The petitioner sought to refer questions of law to the High Court under Section 35G. The Tribunal rejected the reference application, stating that the issues pertained to classification, valuation, and determination of duty, which are not referable under Section 35G. The Court upheld this finding as per the statutory provisions.

Conclusion:
The writ petitions were dismissed, with the Court finding no grounds for interference in the Tribunal's order. The Tribunal's findings were based on substantial evidence and proper adjudication procedures. The rejection of the reference application under Section 35G was in accordance with the statutory provisions.

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