1993 (1) TMI 159 - AT - Central Excise

Issues Involved:
1. Jurisdiction of the Additional Collector to issue the show cause notice.
2. Limitation period for issuing the show cause notice.
3. Validity of the adjudication order.
4. Quantification of the demand.
5. Merits of the case based on evidence and testimony.

Issue-wise Detailed Analysis:

1. Jurisdiction of the Additional Collector:
The appellants argued that the Additional Collector did not have the jurisdiction to issue the show cause notice under Section 11A of the Act, invoking the extended period of limitation beyond six months. They cited the Tribunal's decision in *Eicobex Metals (P) Ltd. v. Collector of Central Excise* which held that only the Collector could issue such notices. However, the Tribunal clarified that the term "Collector" includes an "Additional Collector" as per Rule 2(ii) of the Central Excise Rules. The Additional Collector is not subordinate to the Collector, and thus, the show cause notice issued by the Additional Collector was valid. This interpretation was supported by various judgments, including *Bansal Industrial Gases (Bihar) Ltd. v. Collector of Central Excise* and *Engineering Systems (P) Ltd. v. Union of India*.

2. Limitation Period:
The appellants contended that the show cause notice was issued beyond the maximum period of limitation of five years without establishing fraud, mis-statement, suppression of facts, collusion, or contravention of any rules. The Tribunal noted that the demand of duty had been restricted to a period of five years as prescribed under Section 11A of the Act. The Tribunal referenced the High Court of Gujarat's decision in *Navsari Cotton and Silk Mills Ltd. v. Union of India* which held that a show cause notice issued beyond the prescribed period of limitation was barred.

3. Validity of the Adjudication Order:
The appellants argued that the adjudication order was not a speaking order and lacked proper quantification of the demand. The Tribunal found that the adjudication order did not provide a clear basis for the figures of evasion and lacked independent investigation to substantiate the allegations. The Tribunal emphasized the necessity for a speaking order that clearly outlines the reasoning and evidence supporting the conclusions.

4. Quantification of the Demand:
The demand for Central Excise duty was based on records provided by an ex-employee of the appellant firm. The Tribunal found that these records were not reliable as they were handed over by a disgruntled ex-employee with a motive to harm the appellants. Additionally, the records were not corroborated by independent investigations, such as the source of tobacco supply or the sale proceeds of the alleged clandestinely produced biris. The Tribunal concluded that the quantification of the demand was not substantiated by credible evidence.

5. Merits of the Case Based on Evidence and Testimony:
The Tribunal scrutinized the evidence presented by the department, which was primarily based on the testimony and records provided by the ex-employee, Shri Mahendra Kumar Dongre. The Tribunal found that Shri Dongre's conduct did not inspire confidence, and his testimony was not corroborated by any independent evidence. The records provided by him were considered hearsay and lacked verification from other sources. The Tribunal cited the case of *B.N. Jadeji v. Collector of Customs* which held that conclusions could not be based on hearsay evidence. The Tribunal also noted that the appellant firm was working under a physical control system, and the department failed to establish the allegation of clandestine production and removal of biris.

Conclusion:
The Tribunal concluded that the appeal by the appellants merited acceptance. The impugned order was set aside, and consequential relief was granted to the appellants. The Tribunal emphasized the importance of corroborating evidence and the need for a speaking order in adjudication proceedings. The appeal was disposed of accordingly, with the Tribunal not finding it necessary to discuss other points raised by the appellants, having accepted the appeal on merits.

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