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Issues:
Alleged manufacturing of canvas cloth without payment of proper duty, denial by the appellants, reliance on statement of Shri Ram Pratap, absence of physical evidence of manufactured cloth, inference drawn by Assistant Collector, lack of authorized statement recording, failure to establish manufacturing of canvas. Analysis: The case involved a show cause notice issued to the appellants for allegedly manufacturing canvas cloth without paying proper duty during 1975-76. The appellants denied manufacturing canvas, claiming they only produced dedhsuti. The Assistant Collector confirmed the demand, which was upheld by the Collector (Appeals), leading to the current appeal. The proceedings began with an audit party visit to the factory, where Shri Ram Pratap, in the absence of the proprietor, made statements indicating the manufacturing of canvas. However, later, he denied personal knowledge of manufacturing activities, casting doubt on the reliability of his statements. The Department's case primarily relied on Shri Ram Pratap's statements to conclude that the appellants manufactured canvas. However, no physical evidence of the cloth was presented or tested to confirm its nature. The Assistant Collector's inference that dedhsuti could be classified as canvas based on weight lacked factual basis. Moreover, the statement by Shri Ram Pratap, made to the audit party without proper authorization, was a crucial piece of evidence. As it was not recorded by an authorized person, its reliability was questionable, leaving the Department with insufficient evidence to establish the manufacturing of canvas by the appellants. Ultimately, the appellate tribunal held that the Department failed to prove that the appellants manufactured and cleared canvas cloth during the relevant period. Consequently, the orders of the lower authorities were deemed incorrect, and the appeal was allowed, setting aside the previous decisions with consequential relief for the appellants.
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